The Australian Energy Regulator (AER) has today released for public consultation its draft determination on the Default Market Offer (DMO) prices for 1 July 2020 to 30 June 2021.
In releasing the draft determination, AER Chair Clare Savage said consumers should pay no more than necessary for safe and reliable energy.
“The DMO was introduced by the Commonwealth Government last year to stop energy retailers charging customers on standing offers unjustifiably high prices – also known as the ‘loyalty tax’,” said Ms Savage.
“Since the DMO was introduced on 1 July 2019 for its first 12 month period, a typical residential standing offer bill has reduced by up to $181. For small business customers we have seen reductions of up to $896. We have also seen retailer competition remain steady.
“We are now in the process of setting the DMO for its second year and we want to hear from a wide range of stakeholders and consumers in determining our final DMO prices for 2020-21.”
To stop retailers offering meaningless discounts to customers, the DMO is also designed to be a reference price for all energy discounts to help make it easier for customers to compare deals.
In our Draft Determination we have adjusted the DMO prices in each area based on how retailers’ costs (such as wholesale electricity costs, network charges and environmental costs) are expected to change over the year. These costs will vary from area to area.
“It’s important for customers to remember the DMO is intended as a safety net for those customers who are not engaged in the market. It is not designed to be the most competitive deal.
“Most retailers have cheaper deals on offer, so shopping around remains the best way to get a better energy deal. I encourage consumers to visit our free and independent Energy Made Easy website to compare energy deals”, said Ms Savage.
Consultation is open until 9 March 2020. The final determination for DMO 2020-21 will be published in April 2020.
| DMO price from 1 July 2019 per year | Proposed change on 1 July 2020 | Location |
|---|---|---|
| $1,467 to $ 1,957 | $9-$16 higher | New South Wales (depending on distribution zone) |
| $1,570 | $86 lower | South East Queensland |
| $1,941 | $85 lower | South Australia |
| DMO price from 1 July 2019 (per year) | Proposed change on 1 July 2020 | Location |
|---|---|---|
| $6,204 to $8,045 | $23 lower to $46 higher | New South Wales (depending on distribution zone) |
| $6,025 | $378 lower | South East Queensland |
| $9,120 | $691 lower | South Australia |
* Draft DMO prices are subject to change before final determination.
** These changes to the DMO price are based on the amount of electricity a typical consumer would use in a year. This varies by region and customer type. Please note, actual prices will differ depending on the amount of electricity a particular customer uses, where they live and their retailer.
Background
- The DMO prices will apply in the non-price regulated jurisdictions of New South Wales, South Australia and South-Eastern Queensland. There are approximately 728,784 customers currently on standing offers across jurisdictions in total. The number of customers currently on standing offers by jurisdiction is set out in table 2.
- The AER must determine DMO prices and a reference bill by 30 April 2020 for implementation by retailers from 1 July 2020.
| Residential standing offer customers (Number and %) | Small business standing offer customers (Number and %) | |
|---|---|---|
| New South Wales | 382,813 (11.8%) | 69,138 (21.1%) |
| South-east Queensland* | 176,241 (12.5%) | 25,463 (23.8%) |
| South Australia | 62,269 (8%) | 12,860 (14.6%) |
| Total standing offer customers | 621,323 | 107,461 |
Source: AER Retail Market Performance update, Quarter 1 2019-20.
* Figures extrapolated from all Queensland by excluding Ergon customers. We note other retailers have customers in regional Queensland so figure is approximate.