What is the Default Market Offer?
The energy bill in Australia has reached record highs for several years now and only recently has changed in the retail market given customers some hope that prices will be lowered.
That hope is found in the Default Marker Offer, which is supposed to serve as a price cap for those previously paying the highest prices on contracts known as “standing offers” in Australia.
What is the Default Energy Offer
As of July 1st, 2019, the Default Market Offer (DMO) rolled out to electricity customers in South Australia, New South Wales, and South East Queensland.
It describes the entire bill amount energy companies are able to charge for the “standing offer” prices, which are based on an average usage amount. This reference price makes it easier for Australian consumers to compare electricity companies and find a deal that works better for them.
Now, energy retailers can supply usage charges that are equal to or less to than the DMO reference price. Customers on the Basic Home electricity plan with flat/controlled rates or time of use rates will likely have a lower electricity bill as long as they live in the 3 offered areas.
What is a Reference Price?
A reference price is another term for competitive pricing. If a product or service is sold below the competitor’s price, it’s typically bought up by customers. However, companies can’t offer a cost that’s far too below the market. Otherwise, they’ll price other businesses out of the market.
In a capitalist system, the market determines the price, but if the minimum wage doesn’t keep up with inflation, that product won’t be available to the general population.
While that’s bad in itself, electricity companies further hide what a consumer is likely to spend. Without that knowledge, the average Australian basically chooses their energy company by throwing darts.
What is the Difference Between the DMO and a Standing Offer?
The standing offer and Default Market Offer are similar, but the new default price is generally lower than what’s set by the government. With the DMO, customers who aren’t signed up to market offers can still be given a “fair” deal of electricity.
It also makes it harder for retailers to exploit customers. The reference point then acts as a shared benchmark to clarify comparisons.
How Do I Compare Electricity Plans Using the DMO?
The Default Market Offer provides consumers with an annual total reference point that allows them to make more accurate comparisons between retailers, giving them the knowledge to choose the best offer. This puts the power back to the people instead of the companies.
To compare energy plans, all a local Aussie has to do is look at the percentage difference from the reference price. The bigger the difference in reference price, the better the deal for you.
How Much Will I Save With the DMO?
Although the Default Market Offer has only been given to customers for a little over 2 years, it seems that Australians are saving a bit of money on their electricity bills. Consumers who live in an area that offers DEO will save $53-$116 a year.
SA Power seems to offer the greatest savings between 2021-2022 as there was a 6.3% price difference within that time.
Essential didn’t change its price as much as its competitors (2.7%), with Energex being the second-worst (3.5%). Ausgrid (4.7%) and Endeavor (6%) offer decent savings margins.
Is the DMO Providing the Cheapest Offer?
Customers who move from the standing offer to DMO will see a decrease in their annual bill, but they don’t offer the best savings available.
Energy retailer ReAmped Energy offered a rate 32% lower than the reference price, making their services $439 cheaper per year. With a deal like that, SA Power’s offering looks cheap by comparison, and they don’t even offer the best price.
If you live in South Australia (SA), Elysian Energy seems to offer the best bang for your buck. Although they offer a rate that’s 1% lower than ReAmped Energy, the DMO in South Australia is $323 higher than in New South Wales. In the end, SA customers are saving $536 a year compared to the Default Market Offer. On average, Australian customers will save $350.
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