Default Market Offer 2023–24 draft determination

The Australian Energy Regulator (AER) has released its draft determination of the Default Market Offer (DMO) for 2023–24.

Also known as an electricity price safety net, the DMO protects households and small business customers, on standard retail plans, from unjustifiably high prices in South Australia, New South Wales and south-east Queensland.

The draft determination sets out the approach the AER intends to take to determine the final DMO price which will be released in May. The draft determination is subject to consultation with stakeholder feedback to be factored into the final decision.

At this time, it is estimated that residential customers on standard retail plans could face price increases of around 19.5% to 23.7% depending on their region and whether they have controlled load. Small business customers could face price increases of around 14.7% to 25.4% depending on their region.

The DMO estimates changes in the costs retailers face each year including the cost of generating and transporting electricity. These cost estimates will be further updated in the final decision. The final DMO price changes to apply from 1 July 2023 may differ from this draft determination.

The cost of generating electricity accounts for around 30–40% of the total DMO price and it is the largest driver of increases in the DMO in 2023–24. In the period since we last set DMO prices, the wholesale market has faced unprecedented supply challenges and volatility.

Most retailers purchase contracts for the cost of generating electricity in advance (known as forward contracts). The cost of these forward contracts is factored into the DMO price.

Forward contract prices for 2023–24 have fallen substantially since governments began discussing possible interventions in gas and coal markets in October 2022, however contract prices for 2023–24 in all regions still remain higher than they were at the start of 2022.

AER Chair Ms Clare Savage said that careful consideration had been given to ensuring the policy objectives of the DMO were being met, in particular, protecting consumers from unjustifiably high prices.

“We know many households and businesses are already struggling with cost-of-living pressures. This is certainly a challenging environment for people to hear that further electricity price rises are on the horizon.

“Energy prices are not immune from the significant challenges in the global economy right now; that’s why it’s more important than ever that we strike a balance in setting the DMO to protect consumers as well as allowing retailers to continue to recover their costs and innovate.

“It’s important to understand that the DMO is not the best offer, it is a safety-net.

“We encourage consumers to shop around for the best electricity deal for your circumstances. The AER’s free and independent comparison website can help: www.energymadeeasy.gov.au.

“If you’re struggling to pay your bills, contact your retailer as soon as possible because under national energy laws they must assist you,” Ms Savage said.

The AER invites written submissions on the draft DMO determination up to 6 April 2023.

A final decision will be published in May, with changes to apply from 1 July 2023.

* CL: Residential customers with Controlled Load: these are separately metered tariffs used for appliances such as electric hot water storage systems, pool pumps or underfloor heating.

* Figures extrapolated from all Qld by excluding Ergon customers. We note other retailers have customers in regional Qld so figure is approximate.