What your electricity retailer may not want you to know

Understanding electricity prices, and if you’re getting a good deal, can be tricky. If you’re serious about saving money, addressing your electricity annually is something to pencil in. Retailers will largely leave it up to you. Here’s why …

Understanding the DMO/VDO

Each year the Australian Energy Regulator (AER) determines the ‘reference price’ an energy retailer can charge a customer in NSW, south-east Queensland and South Australia. In Victoria it’s the Essential Services Commission. 

The benchmark prices are based on the average amount of electricity used in a given area and designed to prevent retailers from charging exorbitant prices for customers who haven’t negotiated a market offer. 

In NSW, south-east Queensland and South Australia this is known as the default market offer or DMO, while in Victoria it’s called the VDO. 

Essentially, retailers are required to present their electricity prices with the reference price set by the regulator. This makes it much easier for customers to compare plans, in other words, think apples for apples. 

What exactly must electricity providers do?

• When advertising offers they must set out the comparison percentage to the reference price. This simplifies the process of comparing plans and prices.
• When informing customers of price changes, they also need to advise the reference price comparison percentage. 
• Conditional discounts such as savings for paying bills before or on the due date must be shown for customers to compare.

Tip: if you’re looking for a cheaper electricity plan, the higher the percentage against the reference price, the cheaper the plan. 

But what happens if the plan you’re on is higher than the reference price?

Asking for a market contract

A market agreement or market contract is when a customer negotiates a new offer or a discount with the retailer. This generally only applies for a 12-month period and is known as a ‘benefit period’. 

At the end of the benefit period, the retailer is required to notify the customer of the change. 

So here’s the thing. Some retailers will give customers around seven days to renegotiate a new market agreement and are unlikely to send reminders. 

Be aware: if you don’t respond to the notice, it’s deemed as accepting the new prices, which are often a jump up from the previous years’ plan. You’ll be charged the new rates until you negotiate a new agreement or switch retailers. So keep in mind that once you negotiate a market rate, you will need to renegotiate each year.  

You may not realise it, but with so many offers available, sometimes the threat of leaving can get you a better plan. 

The bottom line

If you receive a notification about changes to your electricity plan, the onus is on you to compare. If you’re already on a market agreement, it’s best to act quickly.

If you need help with finding the cheapest electricity option in your area, contact the experts at Compare Club. 

YourLifeChoices is owned by Compare Club

Have you shopped around for better energy prices? Did you find a better deal? Why not share your experience in the comments section below?

Also read: Record low energy prices are a boon for savvy customers

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