Default Market Offer (DMO) explained

Fact Checked

First introduced by energy regulators as a response to the Australian Competition and Consumer Commission’s (ACCC) inquiry into electricity prices, the ‘Default Market Offer (DMO) serves as a price cap for electricity on standing offer contracts.

With that in mind, Canstar Blue has created this guide to explain how the DMO works.

What is the Default Market Offer?

The Default Market Offer is an electricity tariff set by the Australian Energy Regulator (AER), which serves as a price cap on all standing offers in New South Wales (NSW), South East Queensland (QLD) and South Australia (SA).

Since its introduction, electricity retailers can still technically charge more than the DMO on their market offers, but many prefer not to. The DMO acts as a ‘reference price’ for market offers to be compared to.

It’s important to understand that the DMO is not designed to be a competitive energy price, and the best deals may still be hundreds of dollars a year cheaper. This differs slightly from the Victorian Default Offer, which is designed to be a competitive deal.

Why was the Default Market Offer introduced?

Traditionally, customers have had a choice between two types of electricity contracts – standing offers and market offers. Energy retailers set market offers and often include conditional discounts, guaranteed discounts and rewards programs.

Standing offers are basic electricity deals with no discounts. Standing offers are generally more expensive than market offers and are only intended as the fallback option once a customer’s original electricity deal expires.

The ACCC’s Retail Electricity Price Inquiry report found that the electricity retail market was confusing and too hard for consumers to shop for a better deal. The report also identified that Australian households were being left on standing offers, consequently paying much more for electricity.

The DMO is basically a safety net price for electricity consumers who don’t engage in the energy market. Electricity customers not signed up to market offers may still receive a ‘fair’ deal on electricity.

It also helps to ensure that loyal customers who stick with their electricity retailer don’t experience unanticipated bill shock from expensive standing offers once their original energy deal expires.

How does the Default Market Offer work?

The DMO or reference price is set by the AER. It is based on specific electricity usage and supply charges in different areas, meaning the reference price will vary between states and distribution networks. The following factors influence how the AER sets the reference price:

• Wholesale electricity costs
• Network costs
• Environment costs
• Retail costs
• Retail allowance

The AER legally requires electricity retailers to advertise clear and concise conditions of each plan on their websites, referring to the DMO as a point of reference.

Generally, price differences are reflected as a percentage (e.g. this offer is 15% less than the reference price).

Electricity plans cheaper than the Default Market Offer

To help find a better price, the tables below feature some of the cheapest prices in Canstar Blue’s database compared to the DMO.

How much does the Default Market Offer cost?

Below is a list of the final determination prices for the DMO in 2024-25, as per the Australian Energy Regulator.

Source: Australian Energy Regulator (AER), Table 2.1: Final Determination DMO Prices – 2024-25 (GST inclusive).

Am I affected by the Default Market Offer?

The DMO only affects customers in New South Wales, South East Queensland and South Australia. The DMO does not affect:

• Regulated areas of Southeast Queensland, South Australia and New South Wales
• Gas plans in Australia
• Embedded networks
• Northern Territory (NT)
• Tasmania (TAS)
• Western Australia (WA)
• Victoria (VIC)
• Australian Capital Territory (ACT)

Customers in Victoria have a similar default price for electricity, known as the ‘Victorian Default Offer’, while the ACT follows a similar ‘reference price’ structure in its energy market.

The DMO also applies to customers on the following tariffs:

• Single rate tariffs: Electricity consumption per kWh stays the same regardless of the time of day
• Time of use tariffs: Electricity consumption per kWh is priced differently depending on the time of day
• Controlled load tariffs: Energy-hungry appliances (e.g. pool pumps) are metered separately, drawing energy during off-peak hours for usage during peak hours
• Solar feed-in tarriffs (FIT): a credit paid to customers for exporting unused solar energy back to the grid

How do I find out if I’m on the Default Market Offer?

If you haven’t changed your address or compared electricity plans in a while, chances are you could be on a standing offer.

To verify this, check your latest electricity bill. The contract type should be listed on your bill as a ‘standard offer’ or specific market offer plan.

If you’re currently on the DMO, the AER legally requires all retailers to inform their customers of the following on their energy bills:

• If they could save more by switching to the retailer’s best market offer
• Instruct customers on how much they could save and how to switch over to the best market offer

Are there other ways to save on electricity?

The DMO offers some relief for electricity customers. However, there are other ways to save on electricity:

Consider getting a solar system

Depending on sunlight exposure in your area, installing a rooftop solar system can help ease rising electricity costs.

A solar system can help by:

• Capturing solar energy for immediate use around the house. You will need a net meter and smart meter installed
• Exporting the excess to the grid in exchange for a bill credit through a FIT
• If you opt for a solar battery, you can reduce your reliance on grid power

How much you can save will depend on:

• The type of solar panel, solar inverter or battery purchased
• The angle and direction of the solar panels
• Solar system size
• The number of solar panels installed
• The payback period for the entire solar system

Make your home more energy efficient

Transforming your home into an energy-efficient space helps you to reduce your energy consumption and carbon footprint through passive features such as natural ventilation and improved shading.

Monitor your energy consumption

Actively monitor your energy consumption to understand when and what consumes the most electricity in your home.

If you have a smart meter installed, you can download your retailer’s official app to track your running consumption or self-install an electricity usage monitor for real-time tracking.

Comparing electricity plans

The price difference between the cheapest and most expensive electricity deals can be significant, meaning you could be paying too much for power if you haven’t compared retailers in a while.

Shopping around and comparing electricity plans remains the best way to ensure you’re getting the best value for money.

Original reporting by Jared Mullane
Image Source: arturnichiporenko/Shutterstock.com