Small businesses in South Australia, New South Wales and south-east Queensland face average electricity increases of 14%-25% over the coming few months, as a result of the Australian Energy Regulator’s Default Market Offer (DMO) draft determination, which was released mid-March.
Released annually, the DMO is the maximum price that retailers can charge electricity customers on default contracts known as standing offer contracts.
Although these price hikes are concerning, it's crucial to understand that the Default Market Offer isn't intended to offer a competitive energy rate, and there are still energy plans and discounts available that could be hundreds of dollars less expensive per year.
Here is how the DMO draft prices were expected to affect residential and small businesses in these distribution networks:
Here is how the DMO final prices are expected to affect residential and small businesses in these distribution networks:
Frequently Asked Questions: Default Market Offer (DMO)
What is the Default Market Offer?
It is the maximum price that retailers can charge residential and small businesses on default contracts known as “standing offer” contracts.
Who determines the Default Market Offer?
The Australian Energy Regulator determines the Default Market Offer (DMO) price each year.
When did the Default Market Offer come into effect?
The DMO came into effect on 1 July 2019 and was created as a way to protect electricity users on standard retail plans, from unacceptably high prices in South Australia, New South Wales and south-east Queensland.
Why are costs increasing?
According to the AER, wholesale costs are forecast to increase across all DMO regions due to:
- more expensive electricity futures contracts that were traded before the government began to signal in October 20223 an intention to intervene in the form of temporary price caps4
- relatively stronger coal and gas costs compared with previous years
- reliability issues with aging coal-fired generation assets creating expectations of higher future wholesale energy costs
- the closure of Liddell Power Station in NSW in April 2023 which has been factored into supply and price expectations by the market for some time • the increasingly peaky shape of customer demand.
- The governments’ temporary coal and gas price caps helped to address some of the coal availability and pricing issues observed in 2022.
When will you receive your electricity rates increase notice?
Businesses in affected areas will likely receive their rates increase notice in May or June 2023. An example below is included from one of our business energy clients:
When does the Default Market Offer for 23-24 come into effect?
The regulator will announce a final pricing determination in May that will take effect on July 1.
Which small businesses will be affected?
The Default Market Offer will affect Businesses based in South Australia, New South Wales and south-east Queensland who are on a basic business electricity plan with a flat rate, with or without solar.
What can your small business do?
Knowledge is power and time is everything when running a business!
Once you have received your rates increase notice from your energy supplier, get in touch with Choice Energy’s dedicated small business brokers who can assess the small business electricity market on your behalf, identifying competitive offers that will help ensure your business is in a great position moving forward.