Default market offer prices 2022–23

Sector: 
Segment: 
Status: 
Category: 
Retail pricing information
Date completed: 
26 May 2022
Date initiated: 
25 October 2021
Effective date: 
1 July 2022
Contact: 
General enquiries - Default Market Offer DMO@aer.gov.au

Overview

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. The AER’s role is to determine the DMO price each year.

The DMO applies to small business and residential customers in areas where there is no other retail price regulation: South Australia, New South Wales and south-east Queensland. The DMO price for each area also acts as a ‘reference price’ for residential and small business offers in that area. When advertising or promoting offer pricing, 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 Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 (Regulations) sets out the legislative framework for the DMO.

In April 2022, the Commonwealth Government amended the Regulations to change the date the DMO is required to be published by, from 1 May to the first business day after 25 May each year. The change applies to our determination for 2022-23. Further information can be found on the Department of Industry, Science, Energy and Resources website.

Options paper

On 25 October 2021 we published our options paper on the methodology to be adopted for the 2022–23 default market offer price determination (and subsequent years). We  engaged consultants ACIL Allen to support us in implementing the updated methodology for forecasting wholesale and environmental costs. We invited written submissions on the options paper, and received 16 responses. As part of the consultation process, we held an online stakeholder forum on 10 November 2021 to discuss issues raised in the options paper, which was attended by around 80 people.

Draft determination

On 18 February 2022 we published our draft determination on the methodology to be adopted for the 2022-23 default market offer price. ACIL Allen Consulting supported us 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 4 Draft determination by ACIL Allen Consulting was published alongside the draft determination. We received 18 stakeholder submissions. As part of the consultation process, we held an online stakeholder forum on 9 March 2022 to discuss issues raised in the options paper, which was attended by around 80 people.

Additionally, we engaged Frontier Economics to review ACIL Allen’s wholesale cost forecasting approach to examine how well it performs given current changes in the market, such as increased uptake of rooftop and grid-scale solar.

Final determination

On 26 May 2022 we published our final determination on Default Market Offer prices for the 2022-23 year. We have also published our cost assessment model and the ACIL Allen consultant report alongside our decision. We engaged Frontier Economics' to conduct a review of the DMO wholesale forecast methodology. Its report was published with the final determination on 26 May 2022.