The AER will release the draft determination of the default market offer (DMO) the week beginning 13 March 2023. This is slightly later than in previous years to reflect additional analysis we are undertaking to determine the costs to supply electricity and the new regulatory deadline (extended in April 2022) for the final determination.
The AER began consultation on the DMO for 2023–24 on 3 November 2022 by releasing an issues paper. This paper sought views on aspects of our DMO price setting methodology, including refinements to the approach to forecasting wholesale electricity costs, appropriate settings for the retail allowance and how best to implement expanded DMO protections to customers in embedded networks. The AER published those stakeholder submissions on our website.
In January 2023, the AER sought additional data and information from retailers and the Australian Energy Market Operator and the Australian Energy Market Commission to inform our methodology. We seek to better understand the costs to retailers of purchasing wholesale electricity.
In 2022, factors including low liquidity in the ASX energy futures markets in some regions and barriers to accessing the contract markets may have affected retailers’ ability to hedge their wholesale costs. Following our public consultation process, we sought more information to enable us to assess options for potentially adjusting our wholesale electricity cost methodology if required.
The March 2023 timing will allow for an appropriate period of analysis of these issues while still providing sufficient opportunity for consultation on our draft decision. The regulations require the draft be released at least 42 days prior to the final determination and allow for 21 days of consultation on the draft determination.
The AER will issue the final determination of Default Market Offer prices for 2023–24 by 26 May 2023.
Background
The DMO came into effect on 1 July 2019. The DMO is a maximum price that retailers can charge electricity customers on default contracts known as standing offer contracts. The AER’s role is to determine the DMO price each year.
The DMO applies to small business and residential customers in areas where there is no other retail price regulation: South Australia, New South Wales and south-east Queensland.
The DMO price for each area also acts as a ‘reference price’ for residential and small business offers in that area. When advertising or promoting offer pricing, retailers must show the price of their offer in comparison to the DMO/reference price. This helps customers more simply compare the price of different offers.
The Competition and Consumer (Industry Code – Electricity Retail) Regulations 2019 sets out the legislative framework for the DMO.