Energy giant AGL will cut electricity prices by around nine per cent following the scrapping of the carbon tax.

Chief executive Michael Fraser said the company would cut prices by between eight and nine per cent on average and by more than 12 per cent for Victorian customers of its Powerdirect subsidiary as it passes on savings from the removal of the tax.

“It’s good news for consumers … prices will be coming off,” he said.

The company, however, expects to take a $200 million hit to its earnings due to the abolition of the carbon tax and associated support payments and the shutting down of its Kurnell LPG extraction plant, which is a result of the closure of Caltex’s oil refinery.

The abolition of the tax hurts the value of the company’s renewable energy assets and means AGL won’t receive $100 million in transitional assistance payments linked to its Loy Yang power station in Victoria.

However, Mr Fraser said the end of the tax would ultimately lift the value of Loy Yang.