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Why the Default Market Offer Might Not Be the Right Energy Deal

Why the ‘Default Market Offer’ Might Not Be the Right Energy Deal for You

Are you wanting to switch to a more affordable energy provider or plan? Are you wondering whether the Default Market Offer (DMO) is the right choice for you? Energy and Gas can help you navigate the confusing and overwhelming energy market and aid you in finding a plan that is better suited for your individual needs.

For many people, their energy plan is something they don’t think about much – a random provider was chosen years ago based on a flashy discount, and your energy bill has just become a regular, dreaded expense that has to be paid.

If you fall into this category, then you have likely experienced the sting of a sudden exorbitantly expensive energy bill. This is usually because the limited-time benefit that made you chose your energy plan in the first place has expired. In other words, your market offer has expired, and you are now paying the high usage charges of a standing offer without any discounts.

However, in an attempt to ensure consumers do not experience this financial shock, since 1 July 2019, the Australian Energy Regulator (AER) has introduced DMOs – a price cap on existing standing offers. DMOs currently exist in South East Queensland, New South Wales and South Australia. The Victorian Default Offer was also introduced from 1 July 2019.

What are Default Market Offers?

The goal of DMOs is to provide consumers with fairer energy usage rates and to prevent them from suffering the sudden expense of their benefits expiring. DMOs are only applicable if you pay a flat-rate tariff.

DMOs mean that providers are not able to charge more than the reference price for your area’s average usage and supply charges. It’s important to keep in mind that reference prices vary according to region.   

When DMOs were first introduced in 2019, the AER estimated that that would reduce the annual residential customer bill by:

  • Up to $181 in New South Wales
  • $118 in South-Eastern Queensland
  • $171 in South Australia

Why DMOs Aren’t Always the Cheapest

While DMOs certainly level the playing field in terms of enabling consumers who do not regularly compare and change their energy plans to benefit from lower prices, there are still other more competitive plans on the market.

As such, by comparing your energy plan regularly, you can ensure that you are consistently taking advantage of the competitive market and finding plans that offer cheaper rates than the reference price for your area.

Additionally, DMOs are only applicable for plans that operate on single-rate tariffs. With the help of a smart meter, you can reduce your energy bills with time-of-use or controlled-load tariffs. 

Sally Writes 29 Jun 2020