Australia Establishes Default Market Offer (Price Caps)
April 30,2019
The Australian Energy Regulator (AER) has issued its final determination on Default Market Offer (DMO) prices based on recommendations made by the Australian Competition and Consumers Commission (ACCC).
The default market offer (DMO) prices apply, effective 1 July 2019, to standing offer (non-shopping) customers on relevant tariffs, in network distribution regions not subject to state-based price regulation.
AER said the AER’s DMO prices, "are set at a level that will protect consumers who for one reason or another do not engage in the market while at the same time allowing retailers to innovate, compete for consumers, and continue to invest."
“Standing offers are no longer working as they were intended and this is causing financial harm to disengaged consumers. Our final decision will bring down bills for most people on those offers,” AER chair Paula Conboy said.
This final decision delivers annual reductions from the standard standing offer bill for residential customers of approximately:
• Between $129 and $181 for New South Wales (depending on distribution zone) [all $ Australian]
• $118 for South-Eastern Queensland
• $171 for South Australia
It will also reduce prices for small business customers who are on standing offers. For small business customers, annual reductions from the standard standing offer bill will be approximately:
• Between $579 and $878 for New South Wales (depending on distribution zone)
• $457 for South-Eastern Queensland
• $896 for South Australia
The DMO will also be used as a reference bill from which all discounts must be calculated. "This will stop retailers from offering meaningless headline discounts and help consumers more easily determine whether one offer is more likely to deliver lower bills than another," AER said
The Australian Energy Council said that, "The setting of a regulated Default Market Offer (DMO) will be of limited benefit to just 14 per cent of customers in South Australia, NSW and South-East Queensland. These customers would all be better off on cheaper competitive offers."
“Any customer who remains on the default price, regulated or not, will be paying more than they need to. We welcome the AER’s encouragement of households and businesses to seek out market deals and the Government’s own EnergyMadeEasy website is a useful tool to help customers to make that switch," the Council said