The Default Market Offer

On 1 July 2019, the Australian Energy Regulator (AER) initiated the new Default Market Offer for energy retailers. The prices under the Default Market Offer are based on recommendations made by the Australian Competition and Consumers Commission (ACCC)¹.

Designed to make electricity bills easier to understand for consumers across Australia, the Default Market Offer will completely change how we compare electricity plans. 

What is the Default Market Offer?

The Default Market Offer is designed to cap the price of existing standing offers available from energy retailers. It ensures that customers across the country on standing offers get a fairer price for electricity.

Retailers will still be able to offer discounts to their customers, however the Default Market Offer will be used as a reference bill from which all discounts are calculated¹.

With this in mind, the Default Market Offer means you’ll be able to better determine which offer is suited to your individual circumstances.

Why was the Default Market Offer introduced?

The Default Market Offer was introduced following a review by the ACCC and the AER. The standing offers available to consumers were no longer working as intended and instead were causing financial harm to disengaged consumers¹. They were also brought in with the hope of helping Australians more easily compare different electricity offers.

What’s the difference between the Default Market Offer and other offers?

According to the Australian Energy Regulator, retailers are required to compare market offers with the reference price (Default Market Offer) for that region and type of customer.

Standing offers:

If you move house, let your contract run out, or you simply don’t choose a ‘market’ offer when you sign up with your energy retailer, you’ll be placed on a standing offer. This means there’s no special discounts or incentives, but the price can’t increase more than once every six months².

Market offers:

If you’re actively searching for a suitable energy deal – and you do so regularly – it’s likely that you’re on a market offer. These types of offers typically provide bundle discounts, and a variety of other bonuses; however, the terms and conditions are set by your retailer and the prices can change at any time (depending on your contract).

While market offers are typically better value than standing offers, not every customer wants to spend time researching deals, and instead would prefer something simple they can fall back on. That’s where the Default Market Offer comes in; it caps standing offers to the reference price.

How much money will you save?

If you opt to select the Default Market Offer from your energy retailer, how much money you ultimately save (if at all) depends on a number of factors, such as your location and the type of offer you were previously on.

If you were on a standing offer, the AER suggests that you can expect the following savings*¹:

• Between $129 and $181 for New South Wales (depending on distribution zone)
• $118 for South-Eastern Queensland
• $171 for South Australia

*Based on median standing offer for a benchmark consumption level for flat rate tariff

Who qualifies for the Default Market Offer?

At present, the Default Market Offer will only affect customers and electricity retailers in price-deregulated regions; New South Wales, South East Queensland and South Australia. Consumers in Victoria have a similar offer, however this is known as the Victorian Default Offer and differs slightly.

There is no regulatory requirement for electricity providers in Western Australia, the ACT, Tasmania, the Northern Territory and the rest of Queensland to offer the Default Market Offer.

Is the Default Market Offer better than my current deal?

Unlike the Victorian Default Offer (VDO), the Default Market Offer is not designed to be a competitive offer. While it may lead to annual savings if you were on a standing offer before 1 July 2019, it likely won’t be a better option in comparison to a market offer from an electricity retailer.

This is because one of the objectives of the Default Market Offer is to reduce incentive for retailers to take advantage of disengaged customers³. It will also provide a reference point for customers to identify which market offers are more likely to reduce the cost of their electricity bills, simplifying the comparison process.

Looking for a better deal on your electricity?

At iSelect we can help save you time and energy when it comes to finding a suitable electricity plan. Start comparing electricity plans on offer from our range of providers* today, and see if you can find a plan that suits you.

Sources:
1. https://www.aer.gov.au/news-release/aer-issues-default-market-offer-decision
2. https://www.aemc.gov.au/news-centre/media-releases/putting-stop-energy-discounting-leaves-consumers-worse
3. https://ris.pmc.gov.au/2019/04/05/default-market-offer-price-cap-and-reference-bill-retail-electricity-prices