Energy costs & pricing

On 1 July 2019, the way electricity is marketed to homes and small businesses became simpler and fairer. 

Simpler, because the Australian Energy Regulator and the Victoria Government each introduced a regulated electricity price that applies to all electricity retailers in certain states. Called the Default Market Offer (or DMO) in parts of Queensland, New South Wales and South Australia, and the Victorian Default Offer (VDO) in Victoria, this now acts as a benchmark for the discounts of electricity retailers. 

It’s also fairer, because the DMO is a maximum annual amount electricity retailers can charge customers on a standing offer, and the VDO introduces a capped price for customers on standing tariffs. Sounds confusing? Check out this video below. 

What does it mean for you?

If you were (and still are) on a default electricity product on 1 July 2019, you will probably be already benefiting from a lower price. And if you are in the market for an electricity deal, you’ll find it far easier to choose one, because you’re now comparing like for like. 

To make their advertised offers clearer, retailers must now also show an estimated yearly bill amount, calculated based on an average customer’s usage within a distribution area. 

And in Victoria, retailers will need to show an annual yearly saving, either in dollars or as a percentage.

What happened to high energy discounts?

If you’ve been keeping an eye on electricity offers, you might have noticed that in some areas, discounts aren’t as high as they were pre-July 2019. That’s because the starting point for discounts (being the reference price in parts of Queensland, New South Wales and South Australia and the VDO in Victoria) is now typically lower.

What are the costs of energy?

The costs in your energy bill

Your energy bills consist of two types of costs – fixed (costs you can’t control) and non-fixed costs (costs you can control).

So, what do those fixed costs include?

• Retail - the cost of managing customer accounts, sending out bills and customer service;
• Wholesale - the cost of producing gas or electricity; 
• Network - the cost of transporting gas or electricity down pipelines or power lines and of building and maintaining the network infrastructure; 
• Green - the cost of programs to save energy and support the development of renewable energy such as wind farms and solar.

And the Non-fixed costs are:

• Usage - the cost of the electricity or gas you use, which differs from bill to bill depending on how much energy you use.

Check out this video below.

Reducing non-fixed costs

Cutting your usage is the key to saving energy and money. Check out our energy saving tips and ideas here.