What is the Default Market Offer (DMO) for electricity?

The Default Market Offer, or DMO, traces back to 2018 when the Australian Competition and Consumer Commission (ACCC) initiated an inquiry into retail electricity prices. Recognising the exorbitant costs borne by consumers on electricity offers from retailers, the ACCC introduced the DMO in 2019 to provide a benchmark for assessing the competitiveness of market offers. The default offer is also sometimes referred to as the ‘standing offer’ or the ‘reference price’. It basically means the price you’ll be charged for your electricity if you don’t compare retailers in your region and take advantage of some of the better plans you may be able to access. The DMO serves as a vital safety net, working as a kind of electricity bill regulation. It's designed to shield consumers from overpaying for electricity by acting as a reference point for comparing market offers. The DMO applies to residential properties and small businesses' electricity usage; gas consumption isn't factored in. However, individuals with solar installations can still opt for the DMO as their standing offer. Administered by the Australian Energy Regulator (AER), the DMO is recalibrated annually to ensure fairness for both consumers and retailers. The DMO is also geographically restricted; it only impacts New South Wales, South Australia, and Southeast Queensland. Victorians have their own equivalent known as the Victorian Default Offer (VDO).

How does the electricity default market offer work?

The DMO's calculation involves intricate computations overseen by the AER. Their calculations encompass various elements affecting the cost of electricity delivery, such as:

• wholesale costs (42.48%)

• environmental costs (3.9%)

• network costs (35.05%)

• retail operating costs (9.97%)

• retail allowances, like profit margin (8.46%)

Source: Australian Energy Regulator – Default market offer prices 2023–24: Final determination. Additionally, regional electricity consumption patterns are factored in to reflect geographical disparities in usage.

What is the Default Market Offer in dollar terms?

The DMO 2023-24 is delineated by distribution zone like so:

Source: Australian Energy Regulator – Default market offer prices 2023–24: Final determination 

Keep in mind that the price in each distribution zone is influenced by the average annual usage, which varies between zones. For example, residents in Ausgrid areas, without a controlled load tariff, typically consume about 1,000kWh less electricity compared to those in Endeavour Energy territories.

Due to the dynamic nature of the electricity market, the DMO fluctuates annually, with each distribution zone responding differently to market shifts. The graph below provides a visual representation of these fluctuations, giving you insight into how they may impact you.

Default Market Offers Since Inception (2019):

You’ll find a graphic representation below:

Sources: 

Australian Energy Regulator – Final Determination: Default Market Offer Prices 2019-20

Australian Energy Regulator – Final Determination: Default Market Offer Prices 2020-21

Australian Energy Regulator – Final Determination: Default Market Offer Prices 2021-22

Australian Energy Regulator – Default market offer prices 2022–23: Final determination. Australian Energy Regulator – Default market offer prices 2023–24: Final determination.

Important Note: Assumes an average annual usage of 4,600 kWh and no controlled load tariff.

What makes the DMO different from other electricity retailer offers?

Standing offers, or DMOs, are basic electricity plans. They suit you if:

• No other retailers or offers are available in your location,

• You prefer a simple electricity plan,

• Your current market offer ends and you don't choose a new one.

DMOs usually don't come with fancy deals, but they'll keep your lights on.

Market offers, on the other hand, have some perks, such as:

• Prices are set by the electricity companies and can be more competitive, so you’ll likely save some dollars.

• You might get discounts, like free Netflix or money off if you pay on time.

• There's usually a variety of plans and offers to pick from.

So how does the DMO fit in?

The DMO is like a limit on how much the electricity companies can charge for standing offers. They can't charge more than the DMO, but they can charge less.

A draft determination is announced by the AER in March each year, followed by the final determination in May. These announcements set the DMO for the following year (i.e., the determination in May 2023 set the Default market offer for 2023-24. The final determination in May 2024 will set the default market offer prices for 2024-25).

Is the DMO the best electricity plan for me?

If you want steady prices, your DMO might be for you, but if you prefer flexibility, a market offer could be the way to go. That said, your options, and your choices are very much determined by where you live.

Does the DMO differ across states?

Yes, though it only actually applies to:

• New South Wales, 

• South Australia, 

• Southeast Queensland. 

Victorians have their own equivalent known as the Victorian Default Offer (VDO). 

It’s not fair of course, but rural and regional areas have fewer electricity retailers to choose from. Some towns and properties may have no option other than their DMO.

Sources:

Australian Competition and Consumer Commission – Restoring electricity affordability and Australia’s competitive advantage: Retail Electricity Pricing Inquiry 2023.

Australian Energy Regulator – Default market offer prices 2023–24: Final determination.

https://www.aer.gov.au/news/articles/news-releases/default-market-offer-dmo-2024-25-draft-determination

https://www.aer.gov.au/industry/registers/resources/reviews/default-market-offer-prices-2024-25

Public Interest Advocacy Centre: https://piac.asn.au/2024/03/19/electricity-price-announcement-signals-a-welcome-shift-in-priorities/

Australian Energy Council: https://www.energycouncil.com.au/submissions/default-market-offer-dmo-2024-25-draft-determination/

Minister for Climate and Energy reports: https://minister.dcceew.gov.au/bowen/media-releases/albanese-government-energy-plan-stabilising-energy-prices-after-global-crisis

This guide is opinion only and should not be taken as financial advice. Check with a financial professional before making any decisions.

Paul Coughran is the General Manager of Emerging Verticals at Compare Club. Paul has over 20 years of experience across a wide range of industries including Banking and Finance, Telecommunications and Energy. Paul leads a team of trusted experts dedicated to helping individuals make informed decisions about their insurance and utilities needs.

Meet our energy expert, Paul Coughran

Paul's top energy tips

• 1

  Australia’s top three energy companies still hold 64% of the total Australian market, even though competition was deregulated in 2017.

• 2

  If you don't shop around for energy providers, you’re probably leaving your savings on the table by failing to compare better value options.

• 3

  Most energy providers offer discounted rates for new customers, which is a strong incentive to switch.

• 4

  There should be no interruption when you switch energy providers. You'll need to pay a new company for your energy, but there won't be a disruption to your power supply.