"Increased competition has led to price cuts and large reductions in market concentration," AEMC chairman John Pierce said.

Of the people who switched electricity retailers, most ditched the ‘big three’ and joined smaller second tier competitors. As a result, Origin Energy, AGL and Energy Australia saw their share of the market fall to 65 per cent as more consumers experimented with new and emerging entrants in the market.

Dominant players in the market are under pressure.

AEMC chairman John Pierce

Mr Pierce praised consumers for altering their behaviour by shopping around for a better offer, which forces retailers to compete.

"Dominant players in the market are under pressure and I call on them to respond positively as consumers get to reap the benefits of a market where there are more participants and more real choices targeted to the specific needs of individual households," he said.

Driving the boom of consumers switching was the growth of comparison websites that allow people to see in plain English whether they are getting the best deal. The report found there has also been a shift to simpler and cheaper base offers, with retailers moving away from conditional discounts that often confused customers.

While the record-level of customers switching retailers was positive, the commission said governments should be doing more to encourage people to shop around.

A key recommendation in the report is for governments to force retailers to notify customers who have been languishing on non-competitive default offers for more than a year, as well as restricting the proliferation of conditional discounts such as for paying on time.

Concerning rise in hardship numbers

Yet despite signs of increased competition in the sector, many people are still struggling to keep up with their energy bills.

The report highlighted the alarming jump in the number of people on hardship programs, up 14 per cent in NSW. The proportion of customers who successfully exited hardship programs also decreased, meaning people are remaining stuck on them for longer.

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"Effective competition can deliver efficient prices, but even these may be unaffordable to some consumers given their personal circumstances," the report said.

The price of electricity has spiralled upwards in the past decade, outstripping wage growth and inflation. This disproportionately affects lower-income households, such as pensioners and the unemployed, according to the Australian Council of Social Service.

ACOSS senior energy adviser Kellie Caught said people on low incomes "spend a far greater proportion of their income on energy bills than those on higher incomes".

"It’s freezing cold in parts of the country and there are people on low incomes who are terrified to use a heater for fear of being hit with an energy bill they just can’t afford," she said.

"Retailers need to do more to help people in hardship, including reaching out and assisting those struggling much earlier than they currently are, making sure they are on the best retail offer, and avoiding disconnection."

The average debt for people entering hardship programs is $1034 in NSW, with Queensland the only state which recorded a drop in the number of people on the programs.