In March 2023, Australia’s energy regulators released the DMO and VDO drafts, suggesting that small businesses could expect unprecedented price increases in the new financial year. Following those draft announcements, energy regulators undertook consultation with relevant stakeholders before arriving at a final decision on May 26.
Before we dive into the details of that decision, it’s worth running through a quick refresher on the DMO and VDO.
What are the DMO and VDO?
DMO stands for Default Market Offer. Also known as the “electricity price safety net”, the DMO is an electricity price benchmark issued by the Australian Energy Regulator (AER). Its aim is to protect households and small business customers on standard retail plans from unfairly high electricity prices in South Australia, New South Wales and South-East Queensland.
VDO stands for Victorian Default Offer. The only significant difference between the VDO draft and DMO draft is that the former is issued by Victoria’s energy price regulator, the Essential Services Commission, and so applies exclusively to Victorian consumers.
How do the DMO and VDO final announcements compare to draft decisions?
There wasn’t much good news for small business owners in the DMO and VDO drafts released in March. Both draft standards proposed major price increases across the Eastern seaboard – especially in Victoria, where business customers could expect their bills to rise by a whopping 33%.
Mixed news has come out of the final determinations. Feedback from stakeholders and updated cost calculations have pulled prices lower than anticipated in some regions, while pushing them higher in others.
Here is a breakdown of the final price increases for small businesses approved by VDO and DMO regulators:
- Victoria final decision = +25% on average (draft determination = +33%)
- New South Wales final decision = +14.7% - 21.6%, depending on region (draft determination = +14.7% - 19.9%)
- Queensland final decision = +21.9% (draft determination = 19.9%)
- South Australia final decision = +28.9% (draft determination = 25.4%)
As these figures show, small businesses in Victoria can breathe a (very) slight sigh of relief, while those in Queensland, NSW and South Australia will be gritting their teeth with a little more financial angst.
What can you do to cope with rising prices?
The best way to push back against price hikes is to make sure you’re on the absolute best electricity plan possible. There’s no denying rising wholesale energy costs are putting everyone under financial pressure, but some retailers are still finding a way to offer better deals than the competition.
Claire Savage, Chair of AER, emphasised this in her comments on the final DMO determination.
“We know households and small businesses continue to face cost-of-living pressures on many fronts”, she said, “and that’s why it’s important the DMO provides a safety net for those who might not have shopped around for a better power deal.
“In setting the DMO price this year, we have sought to protect consumers from unjustifiably high prices and at the same time allow retailers to offer consumers better deals than their standard plans. No one wants to see rising prices, and we recognise this is a difficult time - that’s why it’s important for consumers to shop around for a better deal.”
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