Default Market Offer (DMO) Explained

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As any energy-bill payer will tell you, electricity prices have been climbing for some years now. Only recently have changes to the retail market given customers a glimmer of hope for lowering power prices. Following the recommendations of the Australian Competition and Consumer Commission’s (ACCC) 2018 inquiry into electricity prices, the government and regulators have stepped in to introduce what’s called a ‘Default Market Offer’. But what is it, how does it work, and more importantly, how will you be affected?

The Default Market Offer or ‘DMO’ serves as a price cap for electricity for those previously paying the highest prices, on contracts known as ‘standing offers’. While some see this as a great way to lower power bills, others remain concerned that it’s a shift towards price re-regulation in a way that will restrict competition in the market. Either way, the Default Market Offer will have an impact on the price of electricity and the way we shop around for better deals. With this in mind, we’ve assembled a guide to walk you through everything about the changes.

What is the ‘Default Market Offer’?

What is the Default Market Offer

The Default Market Offer is an electricity tariff set by the Australian Energy Regulator (AER), which is likely to effectively serve as a price cap for energy retailers. Customers previously on standing offers will be automatically switched onto their retailer’s cheaper default price. Retailers could technically charge more than the DMO on their market offers, but it seems unlikely that many will do this. Why? Because the DMO also acts as a ‘reference price’ from which all market offers must be compared to.

  • The DMO is basically a safety net price for consumers who do not engage in the energy market, ensuring that loyal customers who stick with their retailer are not exploited by expensive standing offers once the terms of their original energy deal comes to an end.
  • The DMO is not designed to be a competitive price for energy and the cheapest deals will still be hundreds of dollars a year cheaper. This differs slightly to the Victorian Default Offer in Victoria which is designed to be a competitive deal.

The price of the DMO is based on “the efficient cost of operating in the region, including a reasonable margin, as well as customer acquisition and retention costs,” according to the AER.

Energy retailers must advertise clear and concise conditions of each plan on their websites, referring to the default price as a point of reference. These rule changes come after the publication of the ACCC’s Retail Electricity Price Inquiry report back in July 2018, which found the electricity retail market confusing and too hard for consumers to shop for a better deal. The report also identified that customers choosing to stay with the same retailer were being slugged with a ‘loyalty tax’ through non-discounted standing offer rates.

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How does the Default Market Offer work?

The Default Market Offer will act as a reference point for power prices, which is aimed to protect customers who do not engage in the energy market. Those customers who were on a standing offer pre-July 1, 2019 will be moved onto the new default reference price. The reference price is set by the Australian Energy Regulator and is based on specific usage and supply charges in different areas, meaning the reference price will vary between states and distribution networks.

Plans cheaper than the Default Market Offer

The Default Market Offer has been introduced to ensure those who were previously paying the highest prices now pay less, but it is not a competitive deal and you could save much more by switching onto one of the cheapest plans in your area. To find you find a better price, the tables below feature some of the cheapest prices in our database compared to the DMO.

Cheaper than the Default Market Offer in NSW

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Ausgrid network in Sydney but prices may vary depending on your circumstances. This comparison assumes general energy usage of 3900kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Cheaper than the Default Market Offer in QLD

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the Energex network in Brisbane but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4600kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Cheaper than the Default Market Offer in SA

Here are some of the cheapest published deals from the retailers on our database that include a link to the retailer’s website for further details. These are products from referral partners†. These costs are based on the SA Power network in Adelaide but prices may vary depending on your circumstances. This comparison assumes general energy usage of 4000kWh/year for a residential customer on a single rate tariff. Please use our comparison tool for a specific comparison in your area. Our database may not cover all deals in your area. As always, check all details of any plan directly with the retailer before making a purchase decision.

Why was the Default Market Offer introduced?

Traditionally, customers have had a choice between two types of electricity contracts – Standing Offers and Market Offers. Market offers are set by the energy retailers themselves and often include flashy discounts and incentives for customers. Standing offers, on the other hand, were your bare-basic electricity deals, with no discounts. They were generally more expensive than market offers, and were only intended to be used as the fallback option once a customer’s original energy deal lapsed.

While retailers are supposed to contact customers before their market offer ends – and they end up paying more – many Australian households were left on standing offers and were inadvertently paying much more for electricity. Depending on the state and distribution network, some customers were paying hundreds more in annual power bills.

What’s the difference between the Default Market Offer and a Standing Offer?

The Default Market Offer is similar to standing offers, but the new default price is set by the government and is generally lower than previous standing offer prices. This way, customers not signed up to market offers may still receive a ‘fair’ deal on electricity, plus it’ll make it harder for retailers to exploit loyal customers, although they would dispute this tactic anyway.

As for the ‘reference price’, it will act as a shared benchmark, providing clarity to electricity price comparisons. In particular, retailers must now calculate all conditional discounts on their energy plans in accordance with the reference price. This overcomes the issue of large and potentially misleading discounts that may actually hide inflated electricity rates.

How much will I save with the Default Market Offer?

Customers on the Default Market Offer are expected to save an average of between $129 and $181 per year, depending on their state and distribution network.

Distribution Network Residential Single Rate Tariff Annual Saving
Ausgrid (NSW) $1,467 (3900kWh/year) $129
Endeavor (NSW) $1,720 (4900kWh/year) $175
Essential (NSW) $1,957 (4600kWh/year) $181
Energex (QLD) $1,570 (4600kWh/year) $118
SA Power (SA) $1,941 (4000kWh/year) $171

Source: Australian Energy Regulator (AER), Table 1: Final Determination DMO Prices – 1 July 2019 (GST inclusive).

NSW: Market Offer vs Default Market Offer vs Standing Offer

We’ve taken a look at the three big energy retailers to compare the differences in price between their cheapest market offer, the Default Market Offer, and their standing offer before the July 1 changes. While the new default price will replace the more expensive standing offer, customers on the Ausgrid network in NSW can still save more by comparing and shopping around for a better deal.

Energy Retailer Cheapest Market Offer Default Market Offer Standing Offer
AGL $1,271.92
Essentials Plus
$1,467.00 $1,577.99
EnergyAustralia $1,205.56
No Frills
$1,467.00 $1,597.90
Origin Energy $1,204.65
Low Rate Plan
$1,467.00 $1,559.24

Annual prices based on a household connected to the Ausgrid network in Sydney on a single rate tariff as of June 2019. Prices assume annual usage of 3,900 kWh. Prices will vary for those living on a different electricity network.

QLD: Market Offer vs Default Market Offer vs Standing Offer

We’ve explored the three big retailers and compared the prices of all three plan structures – market, default and standing offers. Queensland customers on old standing offers may notice a significant decrease in price once moved onto the DMO, however there are still more savings to be found on other deals in the market.

Energy Retailer Cheapest Market Offer Default Market Offer Standing Offer
AGL $1,352.96
Essentials Plus
$1,570.00 $1,688.87
EnergyAustralia $1,382.88
No Frills
$1,570.00 $1,744.55
Origin Energy $1,339.34
Low Rate Plan
$1,570.00 $1,678.36

Annual prices based on a household connected to the Energex network in Brisbane on a single rate tariff as of June 2019. Prices assume annual usage of 4,600kWh. Prices will vary for those living on a different electricity network.

SA: Market Offer vs Default Market Offer vs Standing Offer

We’ve taken the big three retailers to compare prices between each different plan. Customers in South Australia shouldn’t just assume the new default price is the cheapest on the market, as you’ll see below.

Energy Retailer Cheapest Market Offer Default Market Offer Standing Offer
AGL $1,754.09
Essentials Plus
$1,941.00 $1,991.90
EnergyAustralia $1,811.53
Anytime Saver
$1,941.00 $2,287.20
Origin Energy $1,595.81
Low Rate Plan
$1,941.00 $1,931.34

Annual prices based on a household connected to the SA Power network in Adelaide on a single rate tariff as of June 2019. Prices assume annual usage of 4,000kWh. Prices will vary for those living on a different electricity network.

Is the Default Market Offer the cheapest?

While customers moving from standing offers to the new default offer may see a decrease in their annual power bills, the fun doesn’t stop there. If you’re looking to take advantage of further savings, you’re going to have to do a little homework, which is why we’ve compared the cheapest market offers against the Default Market Offer in each state below. Keep in mind, these prices are before the July 1 changes.

How does the Default Market Offer compare in NSW?

Here’s how five of the cheapest market offers currently in our database stack up against the default offer in NSW before the July 1 changes.

Energy Retailer Cheapest Market Offer Default Market Offer Annual Savings
ReAmped Energy $1,177.35
ReAmped Handshake
$1,467.00 $289.65
Origin Energy $1,204.65
Low Rate Plan
$1,467.00 $262.35
EnergyAustralia $1,205.56
No Frills
$1,467.00 $261.44
Simply Energy $1,206.59
Simply NRMA Plus
$1,467.00 $260.41
Alinta Energy $1,219.16
Fair Deal 30
$1,467.00 $247.84

Annual prices based on a household connected to the Ausgrid network in Sydney on a single rate tariff as of June 2019. Prices assume annual usage of 3,900kWh. Prices will vary for those living on a different electricity network.

How does the Default Market Offer compare in QLD?

Here’s how five of the cheapest market offers currently in our database stack up against the default offer in south east Queensland before the July 1 changes.

Energy Retailer Cheapest Market Offer Default Market Offer Annual Savings
ReAmped Energy $1,309.59
Residential Anytime
$1,570.00 $260.41
Powershop $1,323.02
Mega Pack
$1,570.00 $246.98
Alinta Energy $1,326.93
Home Saver Plus
$1,570.00 $243.07
Future X Power $1,333.13
Flexi Saver
$1,570.00 $236.87
Click Energy $1,337.95
Click Amethyst
$1,570.00 $232.05

Annual prices based on a household connected to the Energex network in Brisbane on a single rate tariff as of June 2019. Prices assume annual usage of 4,600kWh. Prices will vary for those living on a different electricity network.

How does the Default Market Offer compare in SA?

Here’s how five of the cheapest market offers currently in our database stack up against the default offer in South Australia before the July 1 changes.

Energy Retailer Cheapest Market Offer Default Market Offer Annual Savings
Simply Energy $1,582.55
Simply RAA Extra
$1,941.00 $358.45
Origin Energy $1,595.81
Low Rate Plan
$1,941.00 $345.19
Energy Locals $1,665.84
Simple Saver
$1,941.00 $275.16
Alinta Energy $1,668.33
Fair Deal 28
$1,941.00 $272.67
Powershop $1,677.20
Mega Pack
$1,941.00 $263.80

Annual prices based on a household connected to the SA Power network in Adelaide on a single rate tariff as of June 2019. Prices assume annual usage of 4,000kWh. Prices will vary for those living on a different electricity network.

Am I affected by the Default Market Offer?

The Default Market Offer only affects customers in New South Wales, South East Queensland and South Australia for now, but it will likely be introduced to the ACT and Tasmania in due course. Customers in Victoria have had a similar default price for power, however this is known as the ‘Victorian Default Offer’.

Not sure if you’re moving to the new default price? If you haven’t changed address for a while and haven’t compared energy plans, chances are you would have been on a standing offer. In fact, the Australian Energy Market Commission (AEMC) found that nearly a quarter of customers connected to the big three retailers – AGL, EnergyAustralia and Origin Energy – were on standing offers as of April 2019.

For customers in Northern Territory and Western Australia, you will not be affected by the new default offer as different rules and regulations apply in these jurisdictions.

When will the Default Market Offer come into effect?

The default offer prices have been finalised and will come into effect on July 1, 2019. The default price will be reviewed each year and adjusted to reflect any changes in market. All energy retailers must offer customers the Default Market Offer price, which will be updated to reflect the costs of supplying electricity every July.

Are there other ways to save on energy?

If all goes to plan, the new default price will see some welcome relief for many electricity customers. That being said, shopping around and comparing offers remains the best way to reduce your power bill. As we have highlighted, the difference between the cheapest and most expensive electricity deals can be significant, meaning you could be paying too much for power if you haven’t compared retailers in a while.

While price is a major influence in choosing a particular energy plan, there are other features to look out for. You can browse a range of retailers and compare plans by what matters most to you using our comparison tool below.

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