The long-anticipated final determinations for the Default Market Offer (DMO) 2025-26 and Victorian Default Offer (VDO) 2025-26 have now been released. These updates are crucial for anyone looking to understand how electricity prices are set to change from 1 July 2025.
Whether you're a residential customer or a small business owner, here's everything you need to know about the finalised decisions and what they could mean for your energy bills.
What is the DMO and VDO?
Default Market Offer (DMO)
The DMO in Australia stands for the Default Market Offer.
It’s a government-regulated electricity price cap set by the Australian Energy Regulator (AER). The DMO serves as a reference price for electricity retailers and acts as a safety net for customers who don’t engage in the market or switch plans.
Key facts about the DMO
- Applies in: New South Wales, South Australia, and South-East Queensland.
- Applies to: Residential and small business electricity customers on standing offer contracts, however as it also serves as a benchmark for market offers, it has a knock-on effect on pricing for most electricity customers across these regions.
Purpose
- Protect consumers from unreasonably high electricity prices.
- Make it easier to compare energy offers (retailers must show how much more or less their offer is compared to the DMO).
How it works
- Retailers must use the DMO as a benchmark in advertising (e.g., "17% less than the DMO").
- If a customer doesn’t actively choose a plan, they may be placed on a standing offer, which is usually set at the DMO price.
The DMO is updated annually by the AER. The price takes into account network costs, wholesale energy prices, environmental schemes, and retail operating costs.
Victorian Default Offer (VDO)
In Victoria, the Victorian Default Offer (VDO) serves a similar role to the DMO, providing a fair, government-set electricity price for customers who haven't actively chosen a market offer. Set by the Essential Services Commission, the VDO ensures transparency, affordability, and acts as a benchmark for comparing retail electricity plans.
Key highlights from the DMO 2025-26 final determination
The final determination for the DMO, known as DMO 7, solidifies changes in electricity prices for both residential customers and small businesses.
Residential customers
- Electricity prices for residential customers are set to increase by approximately 0.5% to 9.7%, depending on the region.
Small business customers
- Small businesses will see price rises ranging from 0.8% to 8.5%, reflecting the impact of updates to wholesale costs and network charges (for a 10,000-kWh p/a customer).
Reasons for the price changes
Here are some of the primary drivers behind the price adjustments in the DMO:
- Wholesale market costs have increased due to factors such as higher energy demand, generator maintenance outages, and lower output from renewable energy sources like wind and solar.
- Network costs have gone up, driven by inflation and rising interest rates, which affect electricity distribution fees.
These cost increases underscore why the energy market remains volatile, particularly in the face of broader economic fluctuations.
Key highlights from the VDO 2025-26 final determination
The VDO final determination also reflects changes that will vary by region, with some customers experiencing price increases while others see minimal shifts.
Residential customers
- For residential customers, annual electricity bills are expected to shift by -$26 to +$90, depending on the distribution zone. Some areas might see very modest increases, while others may experience higher changes.
Small business customers
- Small business customers on the VDO will also see varied price changes depending on their distribution region, ranging from a $26 decrease to a $90 increase compared to current rates (for a 10,000-kWh p/a customer).
Factors influencing the VDO
Drivers behind these changes include:
- Higher wholesale and network costs, which are the largest contributors to price rises.
- Lower environmental costs, which have helped to somewhat reduce the overall price pressure for some customer categories.
These adjustments aim to strike a balance between affordability for customers and the financial viability of energy providers.
What these changes mean for you
Higher electricity prices aren’t easy to swallow, but there are steps you can take to reduce the impact on your bills. Below are practical ways to prepare and adjust to these likely increases:
- Compare energy plans
While the DMO and VDO act as price caps, better deals often exist in the competitive market. Getting a bill comparison can often identify energy providers offering lower rates.
- Monitor your energy usage
Understanding your electricity consumption patterns can also help you identify ways to cut back. For example, switching to energy-efficient appliances can lead to significant savings.
- Consider renewable options
Solar panels and battery storage solutions can reduce your reliance on grid electricity, potentially lowering your costs over time.
Why staying engaged in the energy market is critical
The DMO and VDO provide protections for customers who don’t actively shop around, but the most substantial savings often come from exploring and switching to competitive market offers. Don't wait for energy price increases to make a move. Staying informed and proactive is the best way to manage energy expenses effectively.
Final thoughts
The finalised changes to the Default Market Offer and Victorian Default Offer are reminders that energy costs remain a significant part of household and business budgets. By staying informed and exploring your options, you can minimise the financial impact of these changes starting on 1 July 2025.
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