Victorian Default Offer 2026–27 explained: Draft decision and bill changes

What is the Victorian Default Offer

The Victorian Default Offer is a regulated electricity price set by the Essential Services Commission. It acts as a safeguard for domestic and small business customers in Victoria who are on a standing offer with their electricity retailer.

A Standing Offer refers to the default electricity or gas contract that a retailer provides to customers who haven't actively looked for a better deal (or Market Offer). The maximum rates that a retailer can charge on a Standing Offer is decided by energy regulators through the Default Market Offer (DMO) in NSW, SA and South-East QLD, and the Victorian Default Offer (VDO) in VIC.

A Market Offer is a type of energy plan provided by energy retailers, typically tailored to attract customers with competitive rates and features. These offers often include discounts, flexible payment options, and other incentives that can help reduce your energy costs.

Unlike Standing Offers, which are closely linked to default market rates and regulations, and usually considerably more expensive, Market Offers are subject to competition, encouraging retailers to offer better deals. To benefit from a Market Offer, businesses need to shop around, compare providers, and actively sign up for a plan that suits their energy needs.

The Victorian Default Offer sets the maximum price that retailers can charge these customers on standing offers. The aim is to provide a simple, trusted and reasonably priced electricity option for customers who may not actively engage in the retail electricity market.

Although many customers choose market offers instead, the Victorian Default Offer also serves as a benchmark that helps customers compare electricity plans. While the VDO directly applies only to customers on standing offers, it can also influence the broader retail market because many retailers use it as a reference point when setting their market offer prices.

Key outcomes from the 2026–27 draft decision

The draft decision proposes that average Victorian Default Offer prices will be lower in 2026–27 than in 2025–26.

For representative customers on flat tariffs, the draft decision indicates the following average annual bill changes.

These estimates are based on typical consumption levels used by the regulator when modelling representative customers. For households this assumes around 4,000 kWh of electricity per year, while small businesses are modelled using around 10,000 kWh annually.

Actual bills will still vary depending on factors such as location, usage patterns, tariff structures and the retailer chosen.

How the Victorian Default Offer price is calculated

The Victorian Default Offer is designed to reflect the efficient cost of supplying electricity to customers. To calculate the price, the Essential Services Commission builds a cost stack made up of several different components.

These cost components generally include:

• Network costs: Charges for using the electricity poles, wires and meters operated by distribution networks.

• Wholesale electricity costs: The cost retailers incur when purchasing electricity from the wholesale market.

• Environmental costs: Costs associated with renewable energy and energy efficiency programs.

• Retail operating costs: Costs incurred by retailers to serve customers, including billing, customer support and retail operations.

• Other costs and margin: Market fees, ancillary charges, licence fees and an allowed retail operating margin.

Network costs are largely determined by tariffs approved by the Australian Energy Regulator and passed through to retailers. Wholesale electricity costs reflect the price retailers pay when purchasing electricity from generators in the National Electricity Market.

Environmental costs include obligations from programs such as renewable energy schemes and energy efficiency initiatives. Retail operating costs cover activities such as billing, customer support and retail operations.

Together these components form the overall price used to calculate the Victorian Default Offer.

Other technical changes in the draft decision

The draft decision maintains many of the same methodological approaches used in the previous Victorian Default Offer determination.

For example, wholesale electricity costs continue to be estimated using a futures market approach. This reflects how retailers typically hedge wholesale market price volatility when purchasing electricity for their customers.

The regulator has also maintained a pass through approach for network costs. Under this method, network tariffs and metering charges approved by the Australian Energy Regulator are incorporated into the Victorian Default Offer price calculation.

The draft decision also reflects adjustments to certain environmental cost components, which are one of the factors contributing to the projected decrease in average bills.

Average domestic customer bill changes by distribution zone

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_{Source: Essential Services Commission, Victorian Default Offer 2026–27 Draft Decision (12 March 2026). Figures represent representative annual bills for domestic customers based on assumed average usage of 4,000 kWh per year.}

Average small business customer bill changes by distribution zone

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_{Source: Essential Services Commission, Victorian Default Offer 2026–27 Draft Decision (12 March 2026). Figures represent representative annual bills for small business customers based on assumed average usage of 10,000 kWh per year.}

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After considering submissions from industry participants, consumer groups and other stakeholders, the commission will release its final determination on the 24^th of May 2026.

What the draft decision means for households

For households currently on a standing offer, the draft decision indicates that average electricity bills may decrease slightly in the upcoming regulatory period.

However, it is important to remember that most customers are not on standing offers. Many households are on market offers with their retailer, which may have different pricing structures.

In these cases, the Victorian Default Offer still plays an important role because it acts as a benchmark. Retailers cannot charge more than the Victorian Default Offer for a standing offer, and changes to the VDO can also have a knock‑on effect across the market. Retailers often use the VDO as a reference point when setting their market offer prices, meaning shifts in the benchmark can influence pricing more broadly.

What the draft decision means for small businesses

Small businesses on standing offers may also see a modest decrease in average electricity bills under the draft decision.

As with households, the actual impact for individual businesses will depend on factors such as energy usage, tariff structure, location and the specific contract they have with their retailer.

For many small businesses, the Victorian Default Offer provides a useful reference price when evaluating electricity plans. Because the VDO acts as a regulatory benchmark, changes to it can also have a knock‑on effect on how retailers design and price their market plans. Businesses can compare their current rates with the regulated benchmark to determine whether they are receiving a competitive offer.

How Zembl can help

Understanding energy pricing decisions and electricity plans can be complicated, particularly when regulatory changes are introduced.

Zembl helps businesses review their energy plans and compare available market options. A Zembl Energy Expert can analyse your current usage, tariff structure and pricing to determine whether your business could access a more competitive energy plan.