Default vs Market Contracts: How to save hundreds on your energy bills

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Many Australians are spending more on electricity than they need to, but the good news is there is an easy way to save. You simply need to understand what type of energy contract you’re on. Since regulatory changes in July 2019 overhauled the industry, some Aussies will have moved from expensive ‘standing offer’ contracts to cheaper regulated contracts, which also act as a reference price. While the new default pricing does offer ‘fairer’ prices, there are still greater savings to be found. In this article, Canstar Blue explains the difference between market offers and the default pricing, showing examples of how much customers can expect to save by switching.

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Default Pricing vs Market Contracts

If you’re not on a market offer energy plan, then you’re most likely paying the maximum a retailer can charge you for electricity. Market offers are contracts designed by electricity retailers and often include discounts, bill credits, competitive rates and other sign-up incentives to help reduce costs or provide other value add-ons. The alternative to market offer plans is the Default Market Offer (DMO) in NSW, QLD and SA, while it’s known as the Victorian Default Offer (VDO) in VIC. These are default, government-regulated energy deals which usually charge higher rates and don’t include any discounts. You will likely be on a default offer if you have never switched retailers, or haven’t switched in several years. In most cases, market offer plans will work out cheaper, and will generally be the more competitive deal out of the two.

Households could save hundreds of dollars a year by switching contract types, potentially even with the same energy retailer. And in many cases, even greater savings could be made by switching from a standard default contract with one retailer to a market contract with another. You can read our guide on switching energy providers here.

According to the Australian Energy Regulator (AER), as many as 1 in 4 households in some areas remain on a standard contract – that means millions of Aussies are paying too much for electricity. Canstar Blue breaks down each state below, comparing the annual cost of default offers to the cheapest market offers of some of the largest retailers. These tables should be used a guide only as costs will not be updated regularly.

New South Wales

Here are some of the cheapest published deals on our database for NSW. These costs are based on the Ausgrid network in Sydney but prices will vary depending on your circumstances. We show one product per retailer, listed in order of lowest price first. See here for further information on the Reference Price, which in this comparison assumes general energy usage of 3900kWh/year, meaning the Reference Price is $1,467/year. Use our comparison tool for a specific comparison. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Electricity Retailer Annual Default Market Offer Annual Cheapest Market Offer Annual Savings
ReAmped Energy $1,467 $1,192 (ReAmped Handshake) $275
Powerclub $1,467 $1,200 (Powerbank Home Flat) $267
Discover Energy $1,467 $1,240 (General Offer) $227
Powershop $1,467 $1,247 (Shopper Market Offer) $220
Origin Energy $1,467 $1,279 (Max Saver – Online Special) $188
EnergyAustralia $1,467 $1,280 (Total Plan Home) $187
Average $1,467 $1,240 $227
Basic Plan Information Documents

*Price assumes general energy usage of 3900kWh/year. Estimated price includes any conditional discounts that may be available. Pricing based on Ausgrid network in Sydney, but prices differ between distribution zones. July 2019. 

As you can see, a typical household on the Ausgrid network in Sydney could save as much as $275 a year by switching between contracts with the same retailer. Even greater savings might be possible by switching contracts AND retailers. All you have to do is pick up the phone or search online and switch.

Queensland

Here are the cheapest published deals on our database for SE QLD. These costs are based on the Energex network in Brisbane but prices will vary depending on your circumstances. Plans are listed in order of lowest price first. See here for further information on the Reference Price, which in this comparison assumes general energy usage of 4600kWh/year, meaning the Reference Price is $1,570/year. Use our comparison tool for a specific comparison. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Electricity Retailer Annual Default Market Offer Annual Cheapest Market Offer Annual Savings
Powerclub $1,570 $1,311 (Powerbank Home Flat) $259
ReAmped Energy $1,570 $1,323 (Residential Anytime) $247
Powershop $1,570 $1,322 (Shopper Market Offer) $248
Alinta Energy $1,570 $1,344 (No Fuss) $226
QEnergy $1,570 $1,345 (Home Saver Lite Variable) $225
Future X Power $1,570 $1,347 (Flexi Saver) $223
Average $1,570 $1,333 $237
Basic Plan Information Documents

*Price assumes general energy usage of 4600kWh/year. Estimated price includes any conditional discounts that may be available. Pricing based on the Energex network in Brisbane. but prices will differ between distributions areas. July 2019. 

Queenslanders can save $237 on average per year by switching to a market contract. While this may not seem like a lot over the course of a year, that’s still a decent amount of cash that you’d probably rather see in your pocket than your power company’s. Once again, switching between contracts AND retailers could herald even greater savings.

Victoria

Here are the cheapest published deals on our database for VIC. These costs are based on the Citipower network in Melbourne but prices will vary depending on your circumstances. Plans are listed in order of lowest price first. See here for information on the VDO, which in this comparison assumes general energy usage of 4000kWh/year, meaning the VDO is $1,334/year. Use our comparison tool for a specific comparison. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Electricity Retailer Annual Victorian Default Offer Annual Cheapest Market Offer Annual Savings
Tango Energy $1,334 $1,149 (Home Select) $185
GloBird Energy $1,334 $1,157 (Easy Save) $177
Lumo Energy $1,334 $1,174 (Lumo Value 5) $160
Elyisan Energy $1,334 $1,178 (The Good Life) $156
Powerclub $1,334 $1,180 (Powerbank Home Flat) $154
Powershop $1,334 $1,199 (Shopper Market Offer) $135
Average $1,334  $1,173 $161
Energy Fact Sheets

~Price assumes general energy usage of 4000kWh/year. Estimated price includes any conditions discounts that may be available. Pricing based on Citipower network in Melbourne, but prices will differ between distribution areas. July 2019.

There are also tidy savings to be made in Victoria. However, with the VDO priced much more competitively than the DMO in other states, there is a smaller difference between the default tariff cost and the cheapest deals.

South Australia

Here are the cheapest published deals on our database for SA. These costs are based on the SA Power network in Adelaide but prices will vary depending on your circumstances. Plans are listed in order of lowest price first. See here for further information on the Reference Price, which in this comparison assumes general energy usage of 4000kWh/year, meaning the Reference Price is $1,941/year. Use our comparison tool for a specific comparison. Our database may not cover all deals in your area, and please check retailer websites for up to date information.

Electricity Retailer Annual Default Market Offer Annual Cheapest Market Offer Annual Savings
Powerclub $1,941 $1,647 (Powerbank Home Flat) $294
Powershop $1,941 $1,648 (Shopper Market Offer) $293
Origin Energy $1,941 $1,654 (Max Saver – Online Special) $287
Diamond Energy $1,941 $1,730 (Diamond Power) $211
Powerdirect $1,941 $1,754 (Discount Saver) $187
AGL $1,941 $1,763 (Essentials Plus) $178
Average $1,941 $1,700 $241
Basic Plan Information Documents

*Price assumes general energy usage of 4000kWh/year. Estimated price includes any conditions discounts that may be available. Pricing based on SA Power network in Adelaide, but prices differ between distribution areas. July 2019.

South Australian residents are already slugged the highest power prices in the country, so don’t punish yourselves further. If you’re on a default offer, you could save $241 on average per year. All you have to do is contact your energy company and ask for its cheapest market contract. And once again, even greater savings are possible by switching retailers AND contracts.

Finding the cheapest market offer

While market offers are clearly cheaper, not all market offers are created equal. So how do you find the best deal? When shopping around for a market contract, there are a few key things to keep an eye out for, such as rates, discounts and benefit periods. Most retailers will only supply advertised discounts for a ‘benefit period’ of 1 to 2 years. After this period expires, customers will need to renew their plan or otherwise be forced to pay much higher rates, usually at the default price respective to the state.

Customers must be vigilant that some energy retailers simply mask massively hiked base rates behind seemingly generous discounts. In some cases, you may find market offer plans with higher rates than the retailer’s default offer prices.

Fortunately, Canstar Blue’s product comparison tool has done all the work for you, taking the guesswork out of comparing plans. Find out where you can find a great deal in your area with our energy tool via this link.

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