AER issues Default Market Offer decision

The Australian Energy Regulator (AER) has today issued its final determination on Default Market Offer (DMO) prices based on recommendations made by the Australian Competition and Consumers Commission (ACCC).

AER chair Paula Conboy said the AER’s DMO prices are set at a level that will protect consumers who for one reason or another do not engage in the market while at the same time allowing retailers to innovate, compete for consumers, and continue to invest.

“Standing offers are no longer working as they were intended and this is causing financial harm to disengaged consumers. Our final decision will bring down bills for most people on those offers,” Ms. Conboy said.

This final decision delivers annual reductions from the standard standing offer bill for residential customers of approximately:

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

It will also reduce prices for small business customers who are on standing offers. For small business customers, annual reductions from the standard standing offer bill will be approximately:

  • Between $579 and $878 for New South Wales (depending on distribution zone)
  • $457 for South-Eastern Queensland
  • $896 for South Australia

The DMO will also be used as a reference bill from which all discounts must be calculated. This will stop retailers from offering meaningless headline discounts and help consumers more easily determine whether one offer is more likely to deliver lower bills than another.

“Working with our ACCC colleagues, we will monitor the impact of DMO prices, especially changes retailers make to their standing and market offer prices. This work will inform future DMO decisions,” said Ms. Conboy.

Ms. Conboy said that while the DMO is intended to stop consumers on standing offers from paying unjustifiably high prices for their power, consumers should use the AER’s independent EnergyMadeEasy price comparison site to find the electricity deal that best suits their needs.

“Market offers are almost always cheaper than the DMO, and shopping around for a deal that best fits the needs of your household or business is the best way to reduce your power bill.

“Our analysis has shown that calling your retailer and asking for a better deal can deliver real savings,” said Ms. Conboy.

Background

The final determination is that DMO prices will be set at the mid-point (50th percentile) between the median market offer and median standing offer in each distribution zone.

The Commonwealth Treasurer and Minister for Energy wrote to the AER on 22 October 2018 requesting the AER develop a DMO consistent with the relevant ACCC recommendations.

The DMO prices will apply to standing offer customers on flat rate tariffs in the non-price regulated jurisdictions of New South Wales, South Australia and South-Eastern Queensland.

There are approximately 758 000 residential customers currently on standing offers in these jurisdictions.

 

Table 1: Number of Residential customers by jurisdiction
State Total customers (June 2018) Market contracts (June 2018) Standing offer customers (June 2018) Annual savings*
South Australia 770 969 700 513 70 456 (9%) $171
SE Queensland 1 366 880 1 152 509 214 371 (16%) $118
NSW

3 139 609

2 666 090 473 519 (15%) $129-$181

*Based on median standing offer for a benchmark consumption level for flat rate tariff
Source: AER Annual Report on Compliance and Performance of the Retail Energy Market 2017-18

 

Table 2: Number of Small business customers by jurisdiction
State Total customers (June 2018) Market contracts (June 2018) Standing offer customers (June 2018) Annual savings*
South Australia 91 103 76 850 14 253 (16%) $896
SE Queensland 105 803 77 213 28 590 (27%) $457
NSW 321 319 245 676 75 643 (24%) $579-$878

*Based on median standing offer for a benchmark consumption level for flat rate tariff
Source: AER Annual Report on Compliance and Performance of the Retail Energy Market 2017-18

Sector: 
Issued date: 
30 April 2019
AER reference: 
NR 08/19
Contact: 
AER Media 0466 409 921 media@aer.gov.au