The peak of high electricity bills could be near, with the Australian Energy Regulator (AER) proposing that the electricity market benchmark could decrease in many parts of Australia from 1 July. However, it’s not all good news, with some areas tipped to see their prices increase from 1 July.

According to the AER, the majority of residential customers could have price reductions of between 0.4% to 7.1%, while the remaining residential customers may have increases between 0.9% and 2.7%

Victoria’s electricity market is regulated separately from other parts of the country, but the Essential Services Commission (ESC) has flagged that residential electricity customers in Victoria could be $112 (or 6.4%) better off from 1 July.

Under the AER proposal, the AER recommends that the average annual household electricity bill for residential customers without a controlled load on the Default Market Offer (DMO) decrease by a year-on-year average of:

• $54 (3%) to $1,773 in NSW Ausgrid distribution network (Sydney/Newcastle/Hunter Valley region)
• $43 (1.9%) to $2,185 in NSW Endeavour distribution network (Wollongong/Lithgow down to Ulladulla)
• $57 (2.5%) to $2,222 in South Australia’s SA Power Networks distribution network (South Australia)

However, in some parts of NSW and SE QLD, residential customers are tipped to see an increase. for residential customers without a controlled load on the Default Market Offer (DMO), there are predicted year-on-year increases of

• $22 (0.9%) to $2,549 in NSW Essential distribution network (rest of NSW)
• $53 (2.7%) to $2,022 in QLD’s Energex distribution network (SE QLD)

However, the draft is still up for public consultation and could change before the final determination is released in May.

Compare the Market’s Head of Energy, Meredith O’Brien, said the draft proposals will be welcomed news for households who have battled the cost-of-living crisis over the past few years.

“Recent figures show that wholesale electricity prices in the National Electricity Market were down around 50% on the previous year in many jurisdictions, so it’s great to see that our energy regulators are forecasting that these savings will be passed onto consumers for the most part,” Ms O’Brien said. “We’ve also seen some of our major energy retailers posting record profits, so it makes sense that many consumers could be offered relief in the form of lower bills from 1 July.”

While she welcomed the proposals, Ms O’Brien said it was important to know that wholesale prices are just one factor considered when determining the default offers, which is why there are small increases forecast in other areas.

“Wholesale prices only account for a third of what makes up an energy bill and a number of other factors like distribution costs, environmental costs, retail costs and network costs are also factored into setting these default prices,” Ms O’Brien said. “While we hope that these low prices will be confirmed in the final determination in a few months, it’s important to note that the costs involved in generating and transmitting electricity also play a major role.”

Ms O’Brien said the purpose of the DMO and VDO is to be a fair price for Australians on electricity standing offers and act as a reference price benchmark to compare alternative market electricity offers against.

“We’ve really seen the energy market bounce back after a tough couple of years, which means that in many cases, there have been some great offers available to consumers,” Ms O’Brien said. “In fact, we’ve continued to see prices as much as 26% below the reference price in some areas, signalling that it’s so important to compare your electricity plans – even if prices are forecast to decrease from 1 July.”

The DMO was first introduced in 2019 as a cap on the price that retailers charge consumers for electricity on standing offer contracts in New South Wales, South East Queensland and South Australia, while it was introduced in the ACT in 2022. The VDO was introduced in July 2019 and has since replaced all standing offers following the Independent and Bipartisan Review of the energy market in Victoria.

The DMO is a cap i.e. the standing offer is the most expensive electricity plan that a retailer can sell in these jurisdictions, so all market offers must be equal to or less than this. The VDO is considered an average of available market offers. Market offers can be higher than the VDO in Victoria.

Around 495,884 (8.6%) of all households in NSW, SA and SE QLD are currently on the default offer – meaning they could be paying more than they need to for electricity. In Victoria, around 360,000 residential customers are currently on the VDO.

You may be on a standing offer contract if you’ve never switched to a market offer or if you switched electricity plans more than a year ago and their discounts have expired.

“Don’t wait until that final announcement on the DMO or VDO  – take back the power now and put your electricity bills under the microscope,” Ms O’Brien said.

“Switching can take as little as two business days and if it means you can avoid paying more than you need to, there’s real value in shopping around every couple of months. Many retailers would be adjusting their plans to make them more competitive, so don’t wait until 1 July to make your move.”

Public consultation on the draft is open until 9 April and Australians will know the DMO rates that will apply from 1 July 2024 to 30 June 2025 in May. Similarly, Victorians should know the VDO rates that will apply from 1 July in May.

Consumers can use Compare the Market’s free energy comparison service to compare a range of plans within minutes.

For more information, please contact:  

Phillip Portman | 0437 384 471 | [email protected]

Compare the Market is a comparison service that takes the hard work out of shopping around. We make it Simples for Australians to quickly and easily compare and buy insurance, energy, and home loans products from a range of providers. Our easy-to-use comparison tool helps you look for a range of products that may suit your needs and benefit your back pocket.