Default Market Offer continues to protect disengaged energy customers

Australian energy customers who haven’t shopped around will continue to be protected from being charged excessive prices.

The Australian Energy Regulator (AER) has today updated the Default Market Offer (DMO) prices for 2020-21. 

AER Chair Clare Savage said, “We know that customers on standing offers were being charged some of the highest prices in the market. The DMO is designed to protect the 10 per cent of residential and 20 per cent of small business customers on standing offers by setting a cap on what energy retailers can charge them.”

“The DMO is not meant to give these customers the best possible energy price. It simply means their energy provider can’t charge them an unjustifiably high price because they haven’t negotiated a better deal.

“It also acts as a reference price on bills so all customers can easily compare plans with other retailers.”

The DMO first came into effect in 2019, saving the average residential standing offer customer between $118 to $181 on their annual bill, and $457 to $896 for the average small business customer. 

This year customers will see DMO prices decrease significantly or remain similar in comparison to last year’s DMO, depending on the region.

Ms Savage said while the DMO offers protection, most energy providers have better deals on offer.

“Overall this year’s DMO prices will maintain the significant savings that customers saw in the first year.

“However don’t underestimate the power of shopping around. I encourage all customers to visit our free and independent Energy Made Easy website to compare offers and find a better energy deal.”

The 2020-21 DMO comes into effect on 1 July 2020.

DMO price from 1 July 2019 per year Proposed change on 1 July 2020 Location $1,467 to $ 1,957 $9-$16 higher New South Wales (depending on distribution zone) $1,570 $86 lower South East Queensland $1,941 $85 lower South Australia

Residential customers by region
  Savings for average customer in 2019 2019-20 DMO prices 2020-21 DMO prices
New South Wales (depending on distribution zone) $129-$181 $1467-$1957 $1462-$1960
South-Eastern Queensland $118 $1570 $1508
South Australia $171 $1941 $1832
Business customers by region
  Savings for average customer in 2019 2019-20 DMO prices 2020-21 DMO prices
New South Wales (depending on distribution zone) $579-$878 $6204-$8045 $6177-$8041
South-Eastern Queensland $457 $6025 $5760
South Australia $896 $9120 $8305

Note: DMO prices are an annual bill amount based on a set model annual usage level, and are not a ‘maximum bill’. An individual customer’s actual bill will vary depending on how much electricity they use, their distribution region, and how their retailer has set the fixed and variable charges of their standing offer.

The AER acknowledges COVID-19 is having an impact on customers and the energy market. We will continue to monitor the impact over the coming months to inform how we can deliver the best outcomes for households, businesses and industry.

Background

The Commonwealth Treasurer and Minister for Energy wrote to the AER on 22 October 2018 requesting the AER develop a DMO consistent with the ACCC’s recommendations in its Retail Electricity Pricing Inquiry final report.

The DMO was introduced to prevent retailers charging standing offer customers excessive prices, while enabling retailers to recover their costs and maintain competition.

To set the DMO prices for 2020-21, an index was used to update the DMO 2019-20 prices to reflect forecast changes in retailers’ costs, including environmental, wholesale electricity, network and retail costs.

The DMO prices apply to standing offer residential and small business customers in the non-price regulated jurisdictions of New South Wales, South-Eastern Queensland and South Australia. 

There are approximately 611,771 residential customers and 107,868 small business customers currently on standing offers in these jurisdictions.

Sector: 
Segment: 
Issued date: 
30 April 2020
AER reference: 
NR 14/20
Contact: 
AER Media 0466 409 921 media@aer.gov.au