April 2, 2024
The Australian Energy Regulator (AER) and the Essential Services Commission Victoria (ESC) have released their draft decisions regarding the latest Victorian Default Offer (VDO) prices and the Default Market Offer (DMO) for the year 2024-25. These determinations aim to provide consumers with transparency and protection by setting maximum prices for electricity which carry over into embedded networks.
Residential and Small business customers within Victorian embedded networks (Local Energy Networks) are price capped by the VDO. Whereas customers within the National Electricity Market (NEM) zones of Southeast Queensland, NSW and South Australia are indirectly benchmarked –with the DMO acting as a price cap for the standing offer of the local area retailers. Customers within embedded networks in these zones/states specifically, are then capped by the Standing offer of the Retailer of Last Resort in their distribution zone.
Victorian Default Offer (VDO) 2024-25
The VDO is designed to ensure that energy consumers have access to a reasonably priced electricity plan. The Essential Services Commission Victoria (ESC) recently released its draft decision for the VDO prices for the upcoming year, 2024-25. The VDO serves as a benchmark price that retailers must not exceed when offering electricity to residential and small business customers who have not actively chosen a specific energy retailer.
Key highlights from the ESC's draft decision on the VDO for 2024-25 include:
These adjustments in the VDO price reflect changes in wholesale energy costs, network charges, and energy futures seeing substantial drops in price from VDO 23/24.
The ESC has published a fact sheet for consumers which can be accessed at the bottom of this article.
Default Market Offer (DMO) 2024-25
The AER has also published its draft determination for the DMO prices over the same period, 2024-25. The DMO ensures that consumers who are on standing offers or have not actively engaged in the energy market are not overcharged by retailers.
Key insights from the AER's draft determination on the DMO for 2024-25 include:
These adjustments aim to provide relief to consumers by reflecting changes in wholesale energy costs and promoting fair competition in the retail energy market.
Linked below you can find a copy of the draft determination of the AER’s DMO 6 decisions.
Implications for Consumers
The proposed reductions in both the VDO and the DMO for 2024-25 is important news for all energy stakeholders within the NEM. Lower energy prices can lead to decreased electricity bills, providing financial relief to residential and small businesses customers. Whereas those operating networks and on-selling must be aware of the regulations in place, and how best to manage their costs.
Consumers within Embedded Networks are encouraged to stay informed about these developments and compare energy plans offered by market retailers to that of their network operators, ensure they are getting the best deal possible. Additionally, Embedded Network Operators will need to consider what pricing will be appropriate to ensure they remain competitive while meeting the needs of their network and customers.
Conclusion
The recent announcements of the draft determinations for the VDO and the DMO for 2024-25 by the ESC and the AER provide valuable insights into the evolving energy market in Victoria. The proposed reductions in VDO and DMO prices offer potential savings for consumers and underscore the regulators' commitment to promoting fair competition and protecting energy consumers.
If you are an owner or operator that would like support to evaluate your pricing for the year ahead to ensure you remain compliant and profitable, reach out to our team of experts who can guide you through setting prices and understanding the financial impacts.
