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The Victorian Default Offer (VDO): What it is & how it may affect you
From 1 July 2019, the Victorian State Government has made energy prices fairer for Victorian households and businesses. It’s called the Victorian Default Offer (VDO), and is designed to ensure Victorians get a fair price for their electricity usage1.
But what is the VDO? How does it work? And more importantly, how much can you save? In this article from iSelect, you’ll learn the answers to these questions and more. Keep reading to find out.
What is the Victorian Default Offer?
The VDO allows customers in Victoria to ask for a ‘default offer’ from their electricity provider. The Essential Services Commission is responsible for recommending to the Victorian Government what the price should be for the offer2.
The price is based on advice from the Essential Services Commission – not by energy companies. Electricity retailers will still be able to offer customer Market Offers that differ from the VDO, such as bundled gas and electricity and other discounts, but every customer in Victoria is able to request the VDO.
Why was it introduced?
The VDO was introduced after an independent review of the electricity and gas retail markets in Victoria. The review looked at whether these markets were operating in the best interests of Victorians, and found Victorian consumers were not gaining the benefits of a competitive retail market3. It concluded that intervention was required to ensure better outcomes for customers and recommended a range of measures to put downward pressure on prices3.
One of these measures is the VDO, which is being supported by the Victorian State Government, along with the review’s ten other recommendations. It’s now a part of the government’s Energy Fairness Plan, which is designed to make the electricity market simpler and more affordable for all consumers.
Will the VDO save you money?
Whether the VDO will save you money or not ultimately depends on the type of offer you’re currently on with your energy retailer.
In Victoria, every retailer is required to make available a standing offer5, with the terms and conditions set by the government. Typically, there are no discounts or sign-up incentives, but the price can’t change more than once every six months. This provides consumers with some consistency when budgeting for their energy bills.
How much you save when your rates are updated to the VDO depends on your electricity use, distribution zone and your current tariffs. However, the Essential Services Commission estimates for residential customers using 4,000kWh per year, the savings could range from $310 to $450 per year2.
From 1 July 2019, all energy providers were required to automatically move customers on simple standing offers to the VDO1. If you think you haven’t been moved, you can call your energy provider or check your next electricity bill.
Market offers are typically more competitive as the terms and conditions are set by the retailers5. Discounts and other offers may be available, however the price can change at any time depending on your contract, and only with advanced notice.
It’s recommended that customers on market offers do some research to find out whether you’re still on a plan that suits your circumstances. The VDO could be more suitable, or it could potentially be another market offer from another retailer. With iSelect, you can compare plans on offer from our range of providers, and select the one that’s suitable for you.*
Do you qualify for the VDO?
The VDO is available to all Victorian households and small business customers; however, there are some exceptions1. If you live in an apartment block, retirement home, or caravan park, you may be receiving your electricity through an embedded network.
At present, embedded networks are unable to access the VDO. However, the Essential Services Commission have committed to review the price cap for customers in embedded networks as soon as possible.
Moving forward, the government has committed to ban embedded networks in new-build residential apartment blocks (except for buildings that use renewable energy micro-grids) to ensure consumers aren’t locked into potentially high energy costs.
Is the VDO better than my current deal?
According to the Australian government, the VDO offers Victorian consumers a fair price for electricity. However, they do state that this is not necessarily the best price. One way to see if you can find a good deal on your electricity, is to compare electricity plans with iSelect.
Compare electricity plans with iSelect
If you’re ready to start investigating a new electricity plan, you can do so online with iSelect. We allow you to compare electricity plans on offer from our range of providers*. Alternatively, if you’d like some free advice from our friendly team, you can call us directly on 13 19 20 and we’d be happy to help.
*iSelect does not compare all energy providers or plans in the market. The availability of plans may change from time to time. Not all plans available from iSelect providers are compared by iSelect and due to commercial arrangements or availability, not all products compared by iSelect are available to all customers. Some plans and special offers are available only from iSelect’s contact centre or website. Energy plans are available only for properties located in eligible areas of Victoria, New South Wales, South East Queensland, South Australia and ACT. Click here to iSelect’s range of providers.