The Default market offer (DMO) came into effect on 1 July 2019. The DMO is a maximum price that retailers can charge electricity customers on default contracts known as standing offer contracts. A customer may be on a standing offer for several reasons – such as, if they have never switched to a retailer’s market offer or have defaulted to a standing offer at the end of their market offer benefit period.
The Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 sets out the legislative framework for the DMO.
The DMO applies to small business and residential customers in areas where there is no other retail price regulation (New South Wales, South East Queensland and South Australia). The DMO price for each jurisdiction also acts as a ‘reference price’ for residential and small business offers in that area. When advertising or promoting market offer prices, retailers must show the price of their offer in comparison to the DMO/reference price. This helps customers more simply compare the price of different offers.
The AER’s role is to determine the DMO price each year. This is the sixth time we have determined the DMO price. As such we refer to the DMO for 2024–25 as ‘DMO 6’.
Issues paper
On 5 October 2023 we released the issues paper for DMO 6. The 22 stakeholder submissions received in response to the issues paper have been published. As part of the consultation process, an online public forum took place on 27 October 2023 to present on and discuss topics from the issues paper. Approximately 80 guests attended.
Draft determination
On 19 March 2024 the AER released the draft determination for DMO 6. We received 16 stakeholder submissions responding to the draft determination. As part of the consultation process, we hosted 2 in-person retailer workshops, and held one-on-one meetings with several stakeholders.
ACIL Allen Consulting supported the AER in the design of a forecasting approach for wholesale and environmental costs. The report Default Market Offer: Wholesale energy and environmental costs estimates for DMO 6 Draft determination by ACIL Allen Consulting was published alongside the draft determination.
We also requested ACIL Allen Consulting produce a long run marginal cost (LRMC) estimate for South Australia for use as a comparative data point against our current forecasting approach for wholesale costs. The report Default Market Offer: LRMC estimates for South Australia by ACIL Allen Consulting was published alongside the draft determination.
Additionally, ACIL Allen Consulting supported us in the approach for the retail margin. The report Default Market Offer: Methodologies for estimating the retail allowance and estimated values by ACIL Allen Consulting was published alongside the draft determination.
Final determination
On 23 May 2024 we published our final determination for DMO 6.
ACIL Allen Consulting supported the AER in the design of a forecasting approach for wholesale and environmental costs and the retail margin. The wholesale energy and environment cost estimates for the DMO 6 final determination and methodological advice for estimating the retail allowance and estimated values by ACIL Allen Consulting have been published alongside the final determination.
The treatment of solar exports within the forecasting approach to determine wholesale costs was a key topic raised by stakeholders in submissions to the draft determination. We engaged ACIL Allen Consulting and Frontier Economics to each provide a note to the AER with their view on how solar exports should be treated within the forecasting approach to determine wholesale costs. These notes were published alongside the final determination.
On 3 June 2024 we published a revised final determination for DMO 6. The revision addresses a small technical error within the DMO model in calculating wholesale costs. These updated prices will come into effect on 1 July 2024. We registered the Competition and Consumer (Industry Code – Electricity Retail) (Updated Model Annual Usage and Total Annual Prices) Determination 2024 on 31 May 2024.
On 7 June 2024 we published a consolidated document highlighting the changes from the small technical error for the purposes of convenience.