An increase to the default energy tariff on July 1 has been announced by the regulator for customers in New South Wales, south-east Queensland and South Australia.
The Default Market Offer, also known as the ‘DMO’, is the price cap that protects consumers from power companies charging ‘unjustifiably high prices’, according to the Australian Energy Regulator (AER).
Based on the AER’s release, residential customers on the DMO will pay between $119 and $227 more a year on energy costs, while small businesses will fork out an extra $459 to $1,146, depending on location.
Recent unstable market conditions are being blamed for the price hikes, where wholesale costs for retailers have risen by up to 49.5 per cent since July 2021.
Unplanned outages at power generation plants, higher coal and gas prices, as well as peak demand increases to grid electricity, have contributed to steeper wholesale costs absorbed by retailers. Market conditions have also worsened by the ongoing war in Ukraine, recent extreme weather events and the coronavirus pandemic.
AER Chair Clare Savage said the Default Market Offer determination for 2022-23 has considered a range of factors, including additional cost pressures felt by consumers and retailers.
“In setting these new DMO prices, we understand the significant impact they will have on some consumers who may already be struggling with the cost of living pressures,” Ms Savage said.
“We have given scrutiny to all factors affecting the DMO calculation and have set safety-net prices that reflect the current conditions and underlying costs to retailers.”
2/3 – The price cap on 'standing offers' has increased this year largely due to significant rises in wholesale electricity costs over the past year. So if you are on a 'standing offer' contract, we encourage you to shop around for a better deal.
— AER (@aergovau) May 26, 2022
An increase to the DMO price was bound to happen given wholesale market conditions of late, which has placed significant pressure on energy retailers across the country, Duncan Permezel, General Manager, Retail Sales and Marketing at Origin Energy, told Canstar Blue.
“As providers of an essential service, the challenge facing all energy retailers is balancing the need to recover the much higher cost of supplying energy to customers today, while being mindful of the cost of living pressures being felt across the community,” he said.
“We are currently reviewing our prices and will communicate these over coming weeks, and noting the increases to the Default Market Offer announced by the AER today, we have already taken steps to protect and support our most vulnerable customers and will freeze prices for all customers in our Power On program so their prices will not change on 1 July.”
Power On is Origin’s support program for residential customers who are having trouble paying bills due to financial hardship.
The AER also stressed that the DMO is not the most competitive deal in market, urging Aussies to use it as a benchmark when comparing prices and plans from a range of energy providers.
“Setting the DMO is not about setting the lowest price. We are required to set a price that will allow retailers to recover their costs, earn a reasonable margin and support retailers to compete and offer better deals and products in a competitive retail environment. If a large number of retailers are unable to recover their costs and are forced to exit the market – as we have seen recently in the United Kingdom – that will add more cost to consumers,” Ms Savage said.
More than 25 energy companies in the UK have gone bust in the past 12 months due to rising wholesale gas prices, leaving over two million customers being switched onto other retailers through the market regulator’s ‘Supplier of Last Resort’ process.
Ms Savage added: “Our safety net DMO price will continue to protect consumers from unjustifiably high prices and will continue to provide the reference point from which consumers can shop around for a better deal.”
Compare Energy Deals
It’s important to note that the DMO change on July 1 is specific to retail energy markets in NSW, QLD and SA. A similar price cap is in place in Victoria, known as the Victorian Default Offer (VDO), which is also increasing on July 1. Click on your state below to see a range of cheap electricity plans from some of Australia’s leading providers.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Ausgrid network in Sydney but prices may vary depending on your circumstances. This comparison assumes general energy usage of 3900kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Citipower network in Melbourne but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Energex network in Brisbane but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4600kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the SA Power network in Adelaide but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.
How much can Aussies save by switching?
While the Default Market Offer does provide some level of security for less-engaged consumers, the real value is generally found by switching to a provider’s market offer, which often include cheaper energy rates, discounts or sign-up incentives.
AER Chair Clare Savage said: “Residential customers can currently save around $443 or 24 per cent off their bill, and small businesses can save around $1,308 or 29 per cent by switching.”
Recent analysis from Canstar Blue also found customers stand to save up to hundreds of dollars per year in electricity costs by switching from a default tariff to a market offer.
What is the 2022-23 DMO price from July 1?
Here are the DMO prices for Aussies on standing offers across each region. Keep in mind for those in NSW, there are three distribution networks so prices will vary according to your location.
Residential customers
| State | 2022-23 DMO Prices | Annual Price Increase |
|---|---|---|
| NSW (varies across distribution zones) | $1,512 to $2,092 | $119 to $227 (8.5% to 14.1%) |
| SE QLD | $1,620 | $165 (11.3%) |
| SA | $1,840 | $124 (7.2%) |
Source: Australian Energy Regulator (AER), Default Market Offer Prices 2022-23, Final Determination
Small business customers
| State | 2022-23 DMO Prices | Annual Price Increase |
|---|---|---|
| NSW (varies across distribution zones) | $3,872 to $4,901 | $690 to $1,146 (10% to 19.7%) |
| SE QLD | $3,446 | $705 (12.8%) |
| SA | $4,539 | $459 (5.7%) |
Source: Australian Energy Regulator (AER), Default Market Offer Prices 2022-23, Final Determination
How many Australians are still paying the default price for energy?
About 10 per cent of the residential market are still on the DMO, equating to about 550,000 customers, while small businesses make up about 18 per cent of the market, or about 90,000 customers. Here are the exact figures of Aussies on the DMO according to the AER:
Residential customers:
- NSW: 331,070 (9.8%)
- SE QLD: 158,113 (10.7%)
- SA: 62,198 (7.8%)
Small business customers:
- NSW: 57,411 (17.8%)
- SE QLD: 21,686 (19.8%)
- SA: 13,631 (15.7%)
Image credits: Robyn Mackenzie/Shutterstock.com
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