If you haven’t renegotiated cheaper electricity prices in the past 12 months, chances are high you’re paying way too much for power.
Power prices keep rising (and will be changing again soon), putting pressure on Aussie household budgets. It pays to shop around each year for the best electricity rates on offer.
If you don’t, you could find yourself on the default market offer (DMO) – or Victorian Default Offer (VDO) if you live in Victoria – and paying far more for your power than you need to.
But first of all, what is the DMO/VDO?
The DMO acts as a ‘reference price’ for electricity in NSW, south-east Queensland and South Australia. It is the maximum price an energy retailer is allowed to charge you on default contracts known as standing offer contracts.
The price is set annually by the Australian Energy Regulator (AER) and comes into effect 1 July each year. Victoria has its own energy regulator and sets its own reference price.
The DMO/VDO is a benchmark price calculated on the average amount of electricity used in a given area and was introduced to prevent retailers gouging customers who hadn’t negotiated a better deal.
Because the DMO/VDO is a price ceiling, competing retailers offers will usually be lower than the DMO/VDO. Retailers are required by law to display any electricity prices alongside the DMO/VDO so customers can see how good the discount really is.
When advertising an offer, a retailer must set out the comparison percentage to the reference price in order to simplify the process of comparing plans and prices.
What to do if you’re on a default electricity offer
If you haven’t reviewed your electricity contract in the past year, there’s a good chance you’ve been moved on to the DMO/VMO. This is because while you may have negotiated a good deal when you signed up with your provider, these contracts are usually only valid for 12 months at which point you will be moved to a higher rate.
This may come as a surprise to you – but it shouldn’t. Energy retailers are required to notify you of any upcoming price changes either via email or post. It’s up to you to review your new prices and either call your retailer for a better rate or start looking elsewhere.
By not responding to that price change notice, you are deemed to be accepting the new prices, which are usually higher than the price you’re currently paying.
AER research shows around 10 per cent of energy customers in DMO/VDO areas are on the default offer. If this is you, it’s time to either renegotiate with your current retailer – or switch retailers.
As annoying as it may be its important to review your electricity prices every 12 months. Energy retailers rely on people not paying attention to price changes. So, maybe set a reminder in your calendar.
A lot of the time, simply threatening to leave your current retailer will result in them offering a cheaper price.
What about the rest of Australia?
If you live outside NSW, Victoria or south-east Queensland then the DMO/VDO does not apply to you.
For Queenslanders living outside the south-east, electricity tariffs are continuously adjusted by the Queensland Competition Authority, who are responsible for price control across a range of industries, not just energy.
Western Australia operates on its own energy grid separate from the rest of the nation and has vastly different rules around energy retailers. For most of the state, residential customers to locked to one energy retailer – Synergy – making a reference price pointless.
The ACT, despite being surrounded by the NSW market, has also opted not to apply the DMO in its jurisdiction, instead letting the Independent Competition and Regulatory Commission set price limits as needed.
For many years, Tasmanians could only get their power through Aurora Energy, who had their prices fixed each year by the Tasmanian Economic Regulator. Competition is now more open on the Apple Isle, and other retailers use Aurora’s maximum price as a reference.
Electricity in the NT is supplied by the government-owned Power and Water Corporation, and prices are set once each year by the Territory government.
When was the last time you compared electricity prices? How much was your last bill? Let us know in the comments section below.
Also read: 60 per cent of eligible Aussies missing out on energy rebates
