Energy savings: Victorian Default Offer about to become cheaper

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Energy bills are about to get cheaper in Victoria, with the state’s energy regulator announcing a proposed price reduction for households and businesses on the default tariff.

The announcement drafted by the Essential Services Commission (ESC) stated that the Victorian Default Offer (VDO) should decrease by seven per cent for residential customers ($105/year) and nine per cent for small businesses ($575/year).

ESC Pricing Director Marcus Crudden said in a statement that the proposed price drop is due to declining wholesale electricity prices – which have reportedly fallen by around 21 per cent for residential customers.

“Our analysis shows the cost of purchasing wholesale electricity has fallen and we believe this should be passed onto consumers to save on their energy bills,” Mr Crudden said.

A timeline of five weeks has been set up by the regulator, encouraging all industry stakeholders to provide feedback which may affect the final VDO price change.

Mr Crudden added that: “A number of submissions noted uncertainties about the impact of the coronavirus pandemic on Victorian consumers and retailers and we are seeking updated information from stakeholders to inform our final decision.

“We are mindful of the risks facing retailers at the moment and at the same time, we need to set a reasonable price that reflects the efficient costs of delivering retail electricity to customers.”

The VDO took effect in July 2019 as part of a nationwide effort to simplify the energy industry in the wake of years of dodgy discounts and confusing offers, especially in Victoria. It acts as price cap for Victorians who do not shop around and engage in the energy retail market, while also acting as a point of reference for all other market offers.

The proposed price cut from the ESC would come 12 months after the VDO was increased in January 2020, by roughly the same amount as the latest proposed price reduction.

The proposal is scheduled to be finalised on 25 November 2020 and will be applied from 1 January 2021 for a 12-month period. This VDO news comes after recent changes to the default tariff in NSW, QLD and SA.

Plans cheaper than the VDO

We’ve listed a bunch of energy plans in Victoria below that are known as ‘market offers’, which are generally much more competitive than the VDO. Not only are market offers usually cheaper in price, sometimes they include value-add incentives like flybuys points, access to rewards programs, and discounts.

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 and to see other products in our database that may be available. 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. The next three tabs feature products exclusively from AGL, EnergyAustralia and Origin.

Here are the AGL Energy plans on our database for Victoria. These are products from a referral partner†. 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 and to see other products in our database that may be available. 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 the EnergyAustralia plans on our database for Victoria. These are products from a referral partner†. 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 and to see other products in our database that may be available. 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 the Origin Energy plans on our database for Victoria. These are products from a referral partner†. These costs are based on the Citipower energy 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 and to see other products in our database that may be available. 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.

Has the Victorian Default Offer helped consumers?

The Victorian Default Offer safeguards customers who aren’t engaged in the retail energy market, meaning those who haven’t switched retailers in a while won’t be left on expensive standing offers. Instead they’ll pay the VDO, which is the maximum price an energy provider can charge across each distribution network.

Canstar Blue Editor-in-Chief, Simon Downes, said the commission’s draft decision to reduce the default price is good news for consumers, but warns bill-payers about not expecting the cheapest prices in their area.

“The VDO is great for Victorians who don’t shop around for the best deals in town as it ensures they’re not left on plans with exorbitant prices, yet the real value is unlocked when comparing the latest market offers,” Mr Downes said.

“Since the introduction of the VDO, retailers have had to lower prices to not only comply with the new rules, but also to remain competitive, which has driven further savings for Victorian households who engage in the market.”

Image credit: Greg Brave/Shutterstock.com

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