Default Market Offer: The Electricity Price Safety Net

The AER is required by competition and consumer regulations to determine the Default Market Offer (DMO) each year for New South Wales, south-east Queensland and South Australia. It has been operating since 2019.

The DMO applies to electricity prices only, and does not currently apply to gas. Those customers who live in an apartment building, caravan park or retirement village, or run a business in a shopping centre may live in an embedded network, and currently will not be able to access the DMO.

Determining the DMO price each year is one of the ways the Australian Energy Regulator works to ensure energy consumers are better off now, and in the future.

The DMO:

• protects consumers from unjustifiably high electricity prices.
• is a safety net price for consumers who haven’t shopped around.
• is the maximum price an electricity company can charge customers on standard retail plans, and when advertising other offers they must compare it to the DMO price
• is set each year and takes into account a range of factors and is adjusted according to market conditions.
• is not a “best offer” price and it may not be the best offer in an area.

If you are concerned about the price you’re paying for electricity, there may be a better offer out there. That’s where www.energymadeeasy.gov.au can help.

What are the different types of electricity plans and how does the DMO price apply to them?

Market retail plans: often contain discounts or other offers. The price is set by the retailer, and it can change at any time. When advertising these plans the retailer must compare their offers to the DMO price so you can see how good their deal is. Around 90% of customers are on these plans.

Standard retail plans: are the default plans offered to customers when they don’t sign up to a market retail plan. It may not be the best offer in an area but the maximum price charged is determined by the DMO price, which once set on 1 July won’t change for the next 12 months. Around 10% of customers are on these plans.

Who does the DMO price apply to?

The DMO applies to residential customers in New South Wales, south-east Queensland and South Australia on standing offers with: flat rate tariffs, where the rates are the same regardless of the time of day, time-of-use tariffs (also called flexible tariffs), where the rates are different depending on the time of day (such as peak evening rates), solar and controlled load tariffs. It also applies to small business customers on standing offers with flat rate tariffs (with or without solar).

In these areas, around 10% of households and around 18% of small businesses are on standard retail plans.

How does the DMO price provide a reference point for comparison?

When energy retailers advertise their market retail plans they have to show how that plan compares to the default offer price.

This allows consumers to compare plans and see how good electricity deals actually are.

How does the AER determine the DMO price?

When setting the DMO price each year we take into account several factors, and feedback from industry and consumers, when calculating the DMO price, including:

• the cost to buy electricity (wholesale cost)
• the cost to transport electricity (network cost)
• the cost to comply with government environment schemes (environmental cost)
• the cost to serve customers (retail cost)

What can I do to get a better deal on energy?

1. Know your plan: take out your latest energy bill to get a feel for the basic information.

2. Contact your retailer and ask theme these questions:

• What kind of contract am I on and when does it expire?
• Are my prices going up? If so, when and by how much?
• Do you have a better deal for me?

3. Consider looking for a better energy plan *

• When comparing plans on www.energymadeeasy.gov.au have a copy of your bill handy. Before switching, ask your new retailer the same questions before signing up.

* The comparison information on Energy Made Easy reflects energy plans that are currently on offer. New DMO prices will come into effect on 1 July 2023 which may see plans change. Energy retailers will then have 2 days to update their new plans into the system.

When will we know the electricity price safety net for 2023/24?

• Week commencing 13 March 2023: Draft determination released
• Before 26 May 2023: Final determination released
• 1 July 2023: New DMO price comes into effect

For more information about the timing of the draft determination release read: https://www.aer.gov.au/communication/draft-determination-of-the-default-market-offer-for-2023%E2%80%9324

Where can I find out more about the status of the DMO determination for 2023/2024?

Keep up to date with the latest information about the status of the DMO determination for determination read: https://www.aer.gov.au/retail-markets/guidelines-reviews/default-market-offer-prices-2023%E2%80%9324