AER’s final determination on Default Market Offer

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A final determination on Default Market Offer (DMO) prices, based on recommendations from the ACCC, has been released by the Australian Energy Regulator (AER).

AER Chair, Paula Conboy, said the AER’s DMO prices are set at a level that will protect consumers who for one reason or another do not engage in the market while at the same time allowing retailers to innovate, compete for consumers, and continue to invest.

“Standing offers are no longer working as they were intended, and this is causing financial harm to disengaged consumers. Our final decision will bring down bills for most people on those offers,” Ms Conboy said.

This final decision delivers annual reductions from the standard standing offer bill for residential customers of approximately:

  • Between $129 and $181 for New South Wales (depending on distribution zone)
  • $118 for south-east Queensland
  • $171 for South Australia

It will also reduce prices for small business customers who are on standing offers. For small business customers, annual reductions from the standard standing offer bill will be approximately:

  • Between $579 and $878 for New South Wales (depending on distribution zone)
  • $457 for south-east Queensland
  • $896 for South Australia

The DMO will also be used as a reference bill from which all discounts must be calculated. This will stop retailers from offering meaningless headline discounts and help consumers more easily determine whether one offer is more likely to deliver lower bills than another.

“Working with our ACCC colleagues, we will monitor the impact of DMO prices, especially changes retailers make to their standing and market offer prices. This work will inform future DMO decisions,” said Ms Conboy.

Ms Conboy said that while the DMO is intended to stop consumers on standing offers from paying unjustifiably high prices for their power, consumers should use the independent ‘EnergyMadeEasy’ price comparison site to find the electricity deal that best suits their needs.

The decision has been met with some disagreement from the industry, with the Australian Energy Council (AEC) suggesting the DMO will be of limited benefit to just 14 per cent of customers in South Australia, NSW and south-east Queensland.

AEC Chief Executive, Sarah McNamara, said the AER’s release of its DMO decision highlights the fact that competitive market offers remain a better option for households and businesses.

“Significantly, for the 86 per cent of customers who are already on a cheaper market deal, this announcement will not lower prices.

“For those currently on an unregulated standing offer who will move to a DMO, the AER has confirmed that savings for residential customers will range from $118-$181 across the three jurisdictions. Larger savings are available for small businesses.

“But the main point is that every one of those customers would be better off on a cheaper market deal.

“Any customer who remains on the default price, regulated or not, will be paying more than they need to. We welcome the AER’s encouragement of households and businesses to seek out market deals and the Government’s own EnergyMadeEasy website is a useful tool to help customers to make that switch.”

Ms McNamara noted that the AER had acknowledged the importance of maintaining competition by including an allowance for price headroom in its final determination.

“The approach taken by the AER does give the retail market the best chance of continuing to deliver competition and, with it, cheap market deals for consumers.”

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