Energy savings coming to QLD and SA as regulator plans cut to default tariff

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Electricity bills are set to drop in south east Queensland and South Australia from July this year, with the industry regulator proposing a reduction to the Default Market Offer (DMO).

Customers in QLD and SA on standard contracts will see a reduction in costs of $62 and $109 a year respectively based on the default tariffs in each area. However, the first review of the new Default Market Offer pricing since its introduction in 2019 doesn’t bring such good news for bill-payers in New South Wales.

NSW residents will have to deal with only marginal differences in default energy prices across each of the state’s three distribution networks – Ausgrid, Endeavour Energy and Essential Energy.

The Australian Energy Regulator (AER) said the proposed price decreases in QLD and SA are the result of wholesale and network cost reductions, while rising default prices in NSW are down to increased wholesale electricity costs in that particular state.

Here’s how the AER’s proposed changes will look across each state:

State Distributor Default Market Offer before 1 July 2020 Default Market Offer after 1 July 2020
New South Wales Ausgrid $1,467 p.a. $1,462 p.a.
New South Wales Endeavour Energy $1,720 p.a. $1,711 p.a.
New South Wales Essential Energy $1,957 p.a. $1,960 p.a.
SE Queensland Energex $1,570 p.a. $1,508 p.a.
South Australia SA Power Network $1,941 p.a. $1,832 p.a.

Source: Australian Energy Regulator, Default Market Offer Prices 2020-21. Prices apply to residential customers on a single rate tariff.  

For NSW, the above table shows a modest annual price increase for more than 380,000 residential customers still on standing offers. While in QLD and SA, about one in ten households on standing offers will see notable savings per annum.

Small business customers are the biggest winners in the AER’s proposed price changes, with annual savings of $378 in SE QLD and $691 in SA reported. In NSW, it will depend on the distribution zone as to whether or not default energy prices experience a decrease or increase, with only small changes expected either way.

What is the Default Market Offer?

Also known as ‘DMO’, the Default Market Offer is the maximum price energy retailers can charge customers on a standing offer within a particular electricity distribution network. The DMO also works as a reference point for retailers when advertising market offers, as each product must be compared to the reference price. For example, the reference price in New South Wales is currently $1,467 on the Ausgrid network (before the proposed July 2020 increase).

From July 2019, customers on expensive ‘standing offer’ contracts were moved onto the cheaper Default Market Offer tariff in New South Wales, south east Queensland and South Australia. This helped to reduce power costs by hundreds of dollars a year for those previously paying the most. While the default tariff is still more expensive than most market offers in a particular state, it acts as a regulated safety net price for households who do not shop around.

In Victoria, customers on standing offers were moved onto the cheaper Victorian Default Offer. This default tariff was increased in January, six months after it came into effect.

Energy Prices Compared

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.

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 Citipower network in Melbourne 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.

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.

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.

What do these changes mean for everybody else?

light bulbs on electricity bill with pen

Although default energy prices are set to change soon, the vast majority of customers won’t be directly affected. This is because most Australians are on market offers, meaning they’re already likely getting a more competitive deal on their electricity in the way of cheaper rates or discounts. However, Canstar Blue Editor-in-Chief, Simon Downes, said the downward pressure on the default tariffs in QLD and SA bodes well for everyone in these states.

“Only a relatively small number of households remain on standard contracts and will directly see their energy bills come down as the result of the proposed changes to the default tariff. But with a still fiercely competitive energy market, many more people could eventually benefit as the retailers aim to remain competitive and keep their market offers well below the default rate.

“Given that NSW customers on default offers won’t see much of a difference in their power bills, now is definitely the time for everyone to shop around for a better deal. These price changes are a timely reminder for all households to review their contracts and make sure they’re not paying too much.

“It’s important that customers don’t assume they’re on the cheapest plan with their retailer and don’t just settle for the default rate. While the default tariffs mean those who do not engage in the market get a fairer deal, there are still significant savings to be had by continuing to shop around.”

Image credits: fizkes/Shutterstock.com, Irina Mos/Shutterstock.com

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