The Victorian Default Offer (VDO)

What is the Victorian Default Offer?

The VDO is set electricity pricing for standing offers — these are essentially default plans you can go on if you can’t or don’t want to go with an advertised or market plan. Each financial year, the Essential Services Commission (ESC) decides what the VDO will be so that all Victorian households and small businesses can access fairly priced electricity without having to engage in the retail electricity market.¹ Additionally, the VDO acts as the maximum price that people on embedded networks can be charged.² Of course, you don’t have to go with the VDO; it’s just there if you want to use it.

The VDO first came into action back in July 2019 after an independent review of the state’s electricity and gas retail markets.³ What this review found was that many customers were paying too much for their energy.⁴ So, the Energy Fairness Plan came along with several reforms, including the VDO, to help make the electricity market simpler and more affordable.⁵

How much is the VDO?

The VDO is determined by the ESC each financial year, taking into account a range of costs involved in generating and supplying electricity.⁶ For 2023–24, the daily supply charges and usage charges for households are detailed below:

^{Source: Essential Services Commission - Victorian Default Offer price review 2023-24}

For small businesses that use less than 40MW/h annually, these are the daily supply charges and usage charges for 2023–24:

^{Source: Essential Services Commission - Victorian Default Offer price review 2023-24}

As you can see, there’s not actually one set price for everyone. Instead, a few different factors apply, including your distribution zone. This is to reflect the different costs in getting electricity to different locations, like Melbourne’s outer suburbs versus Echuca.⁷ If you’re not sure which distribution zone you’re in, it may be listed on your electricity bill.⁸ Alternatively, you can visit the State Government’s Find Your Energy Distributor page.

The VDO also caters to time-of-use tariffs and controlled load tariffs. Time-of-use tariffs are great if you want to take advantage of off-peak periods to potentially help lower your overall energy costs. On the VDO, the peak period for households is 3pm to 9pm each day, while it’s 9am to 9pm weekdays for small businesses. Any other times are treated as off peak.⁹ You’ll need to have a smart meter or interval meter to make use of any time-of-use savings though.

A little like time-of-use tariffs, controlled tariffs are specifically for power-hungry appliances, like pool filters, where electricity is only supplied to them for part of the day. You will need to have a separate power meter for these devices though.

^{Source: Engage Victoria - Victorian Default Offer review 2023–24; Essential Services Commission - 2023–24 Victorian Default Offer Final Decision Factsheet, p2}

To make the VDO fair for everyone, the ESC balances the efficient costs incurred from generating, distributing and selling electricity to you with your right to not be unfairly charged for an essential service.¹⁰ Figures are accurate for the 2023–24 VDO residential flat rate with percentages rounded up to two decimal places.

Is the VDO better than my current Electricity Plan?

While the VDO aims to be a fair price for electricity, it may not always be the cheapest price around.¹¹ This depends on what discounts and offers Electricity Retailers have up for grabs in your area. So, to work out if the VDO is cheaper for you, you’ll need to know where you stand with your current Electricity Plan.

To save yourself some trouble, check if you’re already actually on the VDO. As the VDO applies to standing offers, if you haven’t actively picked and signed on with an Electricity Plan but you are still using electricity, you may be on a standing offer plan. Alternatively, you may have even specifically requested to be on a standing offer with your Electricity Retailer. In either of these situations, you may already be on the VDO.¹² To double check, look over your electricity bill or speak with your Electricity Retailer.¹³

If you are on a market retail offer (the ones you see advertised by Electricity Retailers), you may be paying more or less than the VDO. This depends on discounts, bundles and other offers Electricity Retailers may choose to provide with their plans. You’ll need to look at your contract or latest electricity bill and compare the prices to see how the VDO measures up.

As you do this, remember that market offer contracts may be bundled with different services to give you better value. Additionally, while the VDO stays stable throughout the year, your market offer Electricity Plan may have variable rates or be subject to change with notice from your Electricity Retailer.

But the VDO isn’t immune to a little shifting too. While it only changes on a year-on-year basis, these can be big changes depending on the nature of the wholesale electricity markets. For instance, the 2023–24 VDO average annual bill is about 25% higher than the 2022–23 one because electricity became that much more expensive for energy companies to buy and supply due to the global energy crisis.¹⁴

Ultimately, you’ll need to weigh up your current Electricity Plan against the VDO and decide which you prefer. You may even discover that you’re not happy with either of them and instead want to explore a range of other Electricity Plans to try to find a better-value option. Luckily, iSelect can help with that.

How could the VDO help me save money?

Whether you choose to go on the VDO or not, it may be able to help you save money. For starters, the VDO may simply be cheaper than your existing market offer plan. So, if you decide to go with the VDO on a standing offer, you can trust that you are paying a fair price.¹⁵ But what about when it comes to saving on market offer contracts?

Well, the VDO is still worth knowing about. Not only can it give you a good idea of current reasonable market prices, it’s actually a legal requirement for Electricity Retailers to provide you with the VDO as a comparison reference price for any of their advertised market offers. This gives you a reliable and simple way to compare lots of different Electricity Plans from a wide variety of Electricity Retailers.¹⁶ Plus, it means there’s a whole lot less maths for you to do when comparing plans. Be sure to check whether the Electricity Plans you’re comparing state if they are more or less than the reference price. Choosing a new plan that is less than both your current Electricity Plan and the VDO is one way you may be able to save money on electricity.

Can I get the VDO?

If you live in Victoria, there’s a good chance you can choose the VDO. It’s available to households, as well as small businesses that annually use less than 40 MW/h.¹⁷ If you are in an embedded network, like an apartment block, retirement village or caravan park, you can also access the VDO.¹⁸

Unfortunately, if you aren’t in Victoria, you can’t choose the VDO. But before you vow to go off-grid completely, you might still be able to access another form of default offer. Households and small businesses in New South Wales, South-East Queensland and South Australia can choose the Default Market Offer (DMO).¹⁹ This is a price decided by the Australian Energy Regulator (AER) in much the same way as the VDO.²⁰ It is the max price Electricity Retailers can charge for standard offers and it also acts as a comparison price for market offers. Similarly, while it aims to be fair and protect consumers from paying too much for their electricity if they can’t or don’t want to shop around, it isn’t necessarily the cheapest price out there.²¹

If you live elsewhere in Australia (like Tassie or WA), default offers aren’t really a thing. This is because some states and territories have regulated electricity prices.^{22, 23, 24} Depending on how this is handled, you may be able to still shop around Electricity Retailers for additional value,^{25, 26, 27} or you could be restricted to certain retailers based on availability in your location or how much electricity you use.²⁸

Whether you can access the VDO or not, it can be worthwhile exploring what’s on offer in your area. You may be able to find a plan that better suits your needs or gives improved value. But you won’t know unless you look.

Does the VDO apply to gas?

Although the ESC is Victoria’s independent regulator for the electricity and gas sectors, the VDO only applies to electricity prices. Currently, there’s no similar default offer for gas. However, that doesn’t mean you’re completely in the dark when it comes to finding fair gas prices.

In Victoria, Energy Retailers are by law required to let you know via your bill if you could potentially be saving money on a cheaper plan offered by them. This information needs to appear on your gas bill every four months and every three months for your electricity bill.²⁹ So, keep an eye out for your Best Offer Notice. Alternatively, you can always look at switching to another Gas Plan using iSelect’s comparison tool that covers a range of providers and plans.

Is your cheaper Electricity Plan out there?

Along with the VDO, using comparison tools like those provided by iSelect may help you find a cheaper Electricity Plan. With iSelect, we can help you explore a variety of Electricity Plans and Providers, and you can use your newfound VDO knowledge to help check you’re getting great value for money.* You can start online or give us a call on 13 19 20 today.

^{Sources:
1 Essential Services Commission - Victorian Default Offer
2 Victoria State Government - About the electricity sector
3 Engage Victoria - Review of the Victorian Default Offer Order in Council
4 Premier of Victoria - New Victorian Energy Default Offer
5 Victoria State Government - Review of Electricity and Gas Retail Markets in Victoria (‘Thwaites Review’) and outcomes from the Energy Fairness Plan
6 Essential Services Commission - Victorian Default Offer
7 As above
8 Essential Services Commission - Victorian Default Offer price review 2023-24
9 As above
10 Engage Victoria - Victorian Default Offer review 2023–24
11 Essential Services Commission - Victorian Default Offer
12 Engage Victoria - Victorian Default Offer review 2023–24
13 As above
14 Essential Services Commission - Victorian Default Offer price review 2023-24
15 As above
16 Essential Services Commission - Victorian Default Offer
17 As above
18 As above
19 Australian Energy Regulator - Electricity price safety net
20 As above
21 As above
22 Australian Energy Regulator - Tariff and fees explained
23 Utilities Commission of the Northern Territory - Electricity retail pricing
24 Government of Western Australia - Household electricity pricing
25 Queensland Government - Compare and choose electricity retailers
26 Independent Competition and Regulatory Commission - Setting ACT electricity prices for the next 3 years, p1
27 Office of the Tasmanian Economic Regulator - Electricity Pricing Explained
28 Government of Western Australia - Electricity industry
29 Victoria State Government - Compare energy offers}