The Default Market Offer 2024-25 Decision: What It Means for Your Electricity Bill

Feeling the pinch from rising costs? Some relief might be on the way… 

The Australian Energy Regulator (AER) has just released its final decision for the Default Market Offer 2024-25, and there are some potential ramifications for your electricity bill.  

The long and short of it? Prices are stabilising around the current rate, with modest decreases expected for most affected consumers in South Australia, New South Wales, and South-East Queensland!  

We’d wager that’s some welcome news to many of you. However, there’s still work to do to ensure that you’re on the most suitable plan for your energy requirements and budget.  

What Is the DMO? 

The Default Market Offer (DMO) acts as a protective mechanism against over-inflated energy prices. It sets a cap on the maximum amount energy retailers can charge customers on standard retail plans, helping to ensure you don’t get overcharged or exploited. This impacts residential and small business customers in South Australia, New South Wales, and South-East Queensland. 

While only a small percentage of households in those regions are actually on the DMO (approximately 10%), it serves as a critical yardstick for the energy market. Retailers use the DMO as a reference point to set their own prices, meaning any energy price changes in Australia from the AER can influence the broader market.  

It acts as a baseline that helps consumers understand if they are getting a fair deal and provides a benchmark for comparing different offers. 

What is the Impact of DMO Price Changes? 

Here’s the lowdown on the latest DMO electricity price changes in 2024-25: 

• New South Wales: Residential customers will see approximately a 1% decrease in electricity prices (essentially a DMO price pause). It's a small win, but every bit helps manage household budgets. Small business customers will see decreases ranging from 1% to 8%, which can significantly help reduce operational costs. 
• South-East Queensland: There’s around a 4% increase in electricity prices on the way for residential customers. However, government rebates are expected to help cushion the impact, so check what support is available to you. Small business customers will face a 1% increase, making it crucial for them to explore government rebates and seek out competitive energy deals to mitigate this rise. 
• South Australia: Residential customers will experience approximately a 3% decrease in electricity prices, providing some much-needed relief. Small business customers will see a significant decrease of around 9%, offering substantial savings and better management of operational expenses. 

DMO Electricity Price Changes 2024-25 

Source: Australian Energy Regulator 

Network Costs vs Wholesale Prices 

Wholesale prices are what energy retailers pay for electricity before it reaches your home or business. These prices are influenced by various factors, including supply and demand, fuel costs, and weather conditions.  

In the electricity market in Australia in 2024, wholesale energy costs have stabilised or slightly decreased due to improved supply conditions and reduced demand in certain periods. These stable or decreasing wholesale costs help keep the overall cost of electricity from rising too sharply. 

Network costs are the expenses associated with maintaining and upgrading the infrastructure that delivers electricity from power plants to your home or business. This includes power lines, substations, and other critical infrastructure.  

Unlike wholesale costs, network costs have been rising. Upgrading aging infrastructure, investing in technology to improve grid reliability, and expanding the network to accommodate new sources of renewable energy all contribute to higher network costs. 

These rising network costs are necessary to ensure a reliable and modern electricity supply, but they do impact the final prices you see on your bill. 

The final price you pay for electricity is a combination of wholesale energy costs, network costs, and retail margins (the profit margin for energy retailers). Even though wholesale costs have remained stable or decreased slightly, the rising network costs mean that the overall reduction in energy cost in Australia may not be as significant as it could have been. 

The DMO reflects this balance, aiming to protect consumers from excessive charges while ensuring that the necessary investments in the energy network can continue. 

Actions You Can Take to Potentially Reduce Electricity Bills 

Even with the Default Market offer 2024-25 decision in place, you shouldn’t settle. Here’s how to stay ahead of the game: 

1. Compare Your Options: Don’t let the modest decreases outlined in the Default Market Offer 2024-25 decision lull you into a false sense of security. Use comparison tools like Econnex to explore better deals. You might be surprised at potential savings just waiting to be claimed. Regularly comparing your electricity plan against others in the market can reveal more competitive rates and potentially better service options. Some retailers offer special discounts, rewards, or green energy options that could align better with your household’s values and financial goals. 
2. Review Your Current Plan: When was the last time you checked your electricity plan? If you’re still on a standard retail plan, it’s time to consider a market offer. The ACCC determined in 2023 that 47% of residential customers within New South Wales, Victoria, South East Queensland, and South Australia were paying an equal or higher annual cost than that determined by the DMO. Market offers often come with better rates and perks. Many consumers stick with their current plan out of convenience or loyalty, but this could be costing them more in the long run. By switching to a market offer, you can take advantage of promotional rates, flexible payment options, and other benefits that aren’t available on standard plans. 
3. Leverage Government Rebates: Especially in areas like South-East Queensland, where prices are rising, make sure you’re tapping into government rebates and assistance programs to soften the impact. Government rebates and concessions can significantly reduce your overall energy costs. These programs are designed to help households manage rising expenses, and it’s worth checking your eligibility to ensure you’re not missing out on available financial support. 
4. Adopt Energy-Saving Habits: Simple tweaks can lead to significant savings. To keep your costs down, turn off lights when not in use, switch to energy-efficient appliances, and optimise your heating and cooling. Small changes in your daily routine can add up to substantial savings over time. Investing in energy-efficient appliances, using programmable thermostats, and sealing drafts in your home can reduce your energy consumption and lower your bills. 
5. Stay Informed: The energy market is constantly evolving. By staying informed about regulatory changes, market trends, and available offers, you can make smarter choices for your household. 

Subscribe to energy newsletters, follow industry news, and regularly check comparison websites to stay updated on the latest developments. Being proactive in monitoring the energy market will help you make informed decisions and take advantage of new opportunities as they arise. 

Leverage the Power of Choice 

The AER’s Default Market Offer 2024-25 decision is a key update for Aussie consumers. While some regions will see a slight decrease in electricity prices, others might face increases, albeit with rebates to help. The key takeaway? Don’t be complacent. Regularly review your electricity plan, compare your options, and take advantage of any available savings and support.