What your electricity retailer may not want you to know

Fact Checked
Updated 28/03/2024
What your electricity retailer may not want you to know

Time to read : 3 Minutes

Understanding electricity prices and if you’re getting a good deal can be tricky. If you’re serious about saving money, addressing your electricity on an annual basis is something to pencil in. Retailers will largely leave it up to you. Here’s why…

Understanding the DMO / VDO

Each year the Australian Energy Regulator (AER) determines the ‘reference price’ an energy retailer can charge a customer in NSW, south-east Queensland and South Australia. In Victoria it’s the Essential Services Commission

The benchmark prices are based on the average amount of electricity used in a given area and designed to prevent retailers from charging exorbitant prices for customers that haven’t negotiated a market offer. 

In NSW, south-east Queensland and South Australia this is known as the default market offer or DMO while in Victoria, it’s called the VDO. 

Essentially, retailers are required to present their electricity prices with the reference price set by the regulator. This makes it much easier for customers to compare plans, in other words, think apples for apples. 

What exactly must electricity providers do?

  • When advertising offers they must set out the comparison percentage to the reference price. This simplifies the process of comparing plans and prices.

  • When informing customers of price changes, they also need to advise the reference price comparison percentage. 

  • Conditional discounts such as savings for paying bills before or on the due date must be shown for customers to compare.

Tip: if you’re looking for a cheaper electricity plan, the higher the percentage against the reference price, the cheaper the plan. 

But what happens if the plan you’re on is higher than the reference price?

Asking for a market contract

A market agreement or market contract is when a customer negotiates a new offer or a discount with the retailer. This generally only applies for a 12 month period and is known as a ‘benefit period’. 

At the end of the benefit period, the retailer is required to notify the customer of the change. 

So here’s the thing. Some retailers will give customers around seven days to renegotiate a new market agreement and are unlikely to send reminders. 

Be aware: if you don’t respond to the notice, it’s deemed as accepting the new prices, which are often a jump up from the previous years’ plan. You’ll be charged the new rates until you negotiate a new agreement or switch retailers. So keep in mind that once you negotiate a market rate, you will need to renegotiate each year.  

You may not realise it, but with so many offers available sometimes the threat of leaving can get you a better plan. 

The bottom line:

If you receive a notification about changes to your electricity plan, the onus is on you to compare. If you’re already on a market agreement, it’s best to act quickly.

If you need help with finding the cheapest electricity option in your area, contact the experts at Compare Club.

Go deeper:

Financial disclaimer

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.