The Default Market Offer

What is the Default Market Offer? 

The DMO might not have the powers of Superman, but it still could save your day. For those on standing offers it’s a safety net to help you avoid paying unnecessarily high prices for your electricity — it’s a bill cap essentially.  

All Energy Retailers must include details on how their market offers compare to the DMO, so if you’re on a market offer the DMO is a convenient reference point to see if their plans are as good as their marketing departments claim. 

It’s the Australian Energy Regulator’s (AER) domain to figure out the DMO for each financial year. The aim is to come to a price that’s fair for consumers and retailers alike. 

There are a few things to keep in mind when it comes to the DMO. For starters, it’s only in effect in NSW, SA and South East QLD. For Victorians, don’t worry, you’ve got your own called the Victorian Default Offer (or VDO). It’s also only an option for homes and small businesses and their electricity use; gas isn’t part of the equation. You’re in the clear though if you’ve got solar and get a feed-in tariff, you can still pick the DMO as your standing offer.    

When did the Default Market Offer start? 

The start of July 2019 brought us the power pairing of Shawn Mendes and Camila Cabello on Senorita, a few laughs and tears over Buzz and Woody’s latest adventures, and the introduction of the DMO. Although, the DMO’s journey actually started back in 2018 with the ACCC’s (Australian Competition and Consumer Commission) inquiry into retail electricity prices. Spotting that some consumers were paying more on an average standing offer (sometimes upwards of $800 more) than if they were on the best market offer,¹Australian Competition and Consumer Commission – Restoring electricity affordability and Australia’s competitive advantage: Retail Electricity Pricing Inquiry—Final Report, p241 the ACCC said it was time to shake things up. 

Enter the DMO: a way to stop standing offers spiralling out of control and a handy reference point for when you’re shopping around for plans to see if you’re really getting a good deal or not. 

How is the Default Market Offer calculated? 

The DMO isn’t a number pulled out of a hat — there’s some serious maths involved. Luckily, the AER takes care of all that ready for the start of the new financial year.  

To come to those final figures the AER pull together a stack of numbers that reflect exactly what goes into getting electricity to your place, including: 

• Wholesale costs 
• Environmental costs 
• Network costs 
• Retail operating costs 
• Retail allowances, like profit margins 

The chart below gives you an idea of exactly how these apply to the overall DMO price. 

Plus, the AER also look at the average amount of electricity someone in each region uses. You can imagine if a person lives in Cairns and needs to run the aircon all the time they might end up using more electricity than someone keeping cool and comfortable naturally in Sydney. So, the DMO reflects those little regional quirks. 

How much is the DMO? 

While they’re not quite as exciting as the lottery results, the DMO prices may be worth paying a bit more attention to. For homes with or without a controlled load tariff in 2023–24, these are the DMO prices broken down by distribution zone. 

Source: Australian Energy Regulator – Default market offer prices 2023–24: Final determination, p6 

Remember, each distribution zone’s price comes from a different average annual usage. For instance, Ausgrid locals without a controlled load tariff use about 1,000kWh less than people living in Endeavour Energy territory.²Australian Energy Regulator – Default market offer prices 2023–24: Final determination, p6

Since the electricity market fluctuates, the DMO does too each year with each distribution zone riding the wave in its own way. The below graph gives you an idea of what this could look like for you. 

The gradual upward trend of the DMO (and electricity prices in general) has a few culprits. Higher wholesale electricity prices, brought about by gas and coal costing more and the Lidell Power Station shutting down, are a key factor, for instance. Market offers aren’t immune to these factors either, so the DMO gives you an idea of how market offer plans may have crept up in price too. 

Depending on where you live and how much electricity you use, the DMO might strike you as a good deal. Just remember, it’s not a guarantee of the lowest price out there. Competitive market offers might come in under the DMO, so it could be worth seeing what other plans are out there before you sign on.  

What’s the difference between the DMO and other market offers? 

To get your doctorate in DMO, you first need to understand how standing and market offers differ. 

Standing offers are the electricity plans you go on if: 

• There are no market offers available in your area 
• You don’t want to have a market offer plan 
• Your market offer plan finishes up and you don’t renew it or pick a new one 

They typically aren’t packed with deals and discounts, but if you just want your lights to turn on they can be a good choice. 

Market offers can stand out more than standing offers because: 

• The prices are set by Electricity Retailers and can be competitive 
• They can have discounts and benefits attached, like free Netflix or money off if you pay your bill on time 
• You might have a range to choose from in your area and have flexibility to swap to a better-value deal 

So how does the DMO fit into it all? Well, like with market offers, Electricity Retailers can name a price for standing offer plans. However, the DMO is the price cap for what they can charge. You shouldn’t see a standing offer plan that comes in at more than the DMO.  

Depending on what you’re looking for in an Electricity Plan, the DMO might be right up your alley with static prices for the year or you could find more joy in a flexible market offer. 

Where can I find and compare Electricity Plans? 

If you’re keen to see if there’s a deal that leaves the DMO in the dust, you can compare Electricity Plans with iSelect. It only takes a few minutes with our online comparison tool or you can give our comparison experts a call on 13 19 20.