Why the DMO and VDO won't change your commercial & industrial energy prices

What are the DMO and VDO?

The Default Market Offer (DMO) and Victorian Default Offer (VDO) are price caps set by regulators for residential and small businesses. They're updated annually - and yes, we will see them decline on 1 July 2026.

But here's the thing: those decreases aren't a signal that commercial and industrial (C&I) prices are about to decrease. They're a reflection of something that's already happened in the wholesale energy market.

The wholesale energy market: Where the real story is

Your C&I energy contracts are priced directly from the wholesale forward energy market forecasts. This is where retailers source their pricing every single day.

When wholesale prices soften - like they have recently - that immediately flows through to C&I quotes. Retailers continuously factor in wholesale forecasts when updating their pricing - though their risk appetites, hedging strategies and margins vary. The point is: wholesale market movements are reflected in C&I quotes much faster than regulatory announcements.

The key point: the wholesale market moves fast. By the time you see headlines about energy prices changing, those market movements have already been priced into current C&I contract quotes. There's typically minimal lag between wholesale market movements and C&I quotes. Waiting isn't likely to give you a hidden advantage.

Why waiting for wholesale prices to improve might not help

We often hear this: "Should we wait to renegotiate? Wholesale prices might drop further, so won't that help our C&I contract?"

The answer is: it's unlikely to help you. Here's why:

Waiting for wholesale prices to improve introduces timing risk. Yes, wholesale prices could soften further. But they could also rise. By delaying your decision, you're gambling on the market moving in your favour - and that's a gamble with your energy budget.

More importantly, retailers price C&I contracts based on wholesale forecasts and their own margin requirements, which can shift independently. Even if wholesale prices do soften, there's no guarantee you'll see that benefit reflected in your next C&I quote.

Think of it this way: The wholesale market is the share price. By watching it move, you're only seeing where it's already been - not where it's heading next. Waiting for prices to fall is just waiting for yesterday's market data to tell you something useful.

The smarter approach? Lock in when the pricing works for your business - not when you think the market might improve.

What actually drives your C&I pricing

Your energy contract price depends on several factors - and the DMO/VDO isn't one of them:

• Wholesale forward energy market prices - where the real action is

• Network charges - different for every region

• Your load profile and consumption patterns - unique to your business

• Contract term and risk management - how you want to manage volatility

Each of these matters. The wholesale market component is significant, yes, but it's only one part of your total energy cost.

Note: While DMO/VDO announcements don't directly impact C&I pricing, the underlying network charge adjustments that inform these regulatory decisions do affect C&I customers. We recommend reviewing your network costs separately as part of your contract renewal

The real timing question

Here's what matters: Where is wholesale market pricing at the moment you secure your contract?

Wholesale markets move daily. Markets can swing based on weather forecasts, fuel costs, demand expectations, and a dozen other factors. Delaying a decision doesn't mean you're waiting for a better price - it means you're taking on the risk that prices could move either way.

If your business is approaching an energy contract renewal, the real question isn't about the DMO announcement at all. It's: ‘What are wholesale prices right now, and does locking in at current rates make sense for your business?’

Recent wholesale energy market trends  

Good news for energy users — wholesale electricity prices in May 2026 hit their lowest levels in years, and that's flowing through to better value for C&I businesses locking in contracts today.

NSW prices for 2026 finished May around $85/MWh^, down from roughly $93/MWh^ at the start of the month — and sitting about 30% lower than where prices were at this same time last year. Queensland, Victoria and South Australia all told a similar story, with 2026 contract prices at or near multi-year lows across the board.

So what's behind the drop? A mild autumn has kept demand soft, and the ongoing rollout of batteries and renewable energy across Australia's grid continues to add more supply into the market.

With winter on the way and the traditionally busy June contracting period now underway, the coming weeks will be telling. If you've been considering locking in your energy rates, the current market conditions make this a particularly good time to explore your options.

^Based on ASX Energy Futures (NSW) data as at 02.06.206

What you should do instead

Focusing on market timing and your own business needs when it comes to energy procurement.

Here's a smart approach:

1. Talk to an energy expert. Someone who knows the C&I market and can advise on timing based on actual wholesale conditions, not media headlines.

2. Get current quotes across multiple retailers. Wholesale forecasts are visible to all of them, so you're comparing apples to apples.

3. Understand your consumption profile. Different load patterns attract different pricing. Make sure retailers understand your usage.

The wholesale market is where C&I energy pricing is derived from. Once you understand that, DMO announcements aren't a factor and start being what they actually are: regulatory updates for residential and small business energy customers.

How Zembl can help

Wholesale markets are complex. Timing decisions are tricky. Energy procurement can be time-consuming and technical.

That's exactly why we're here.

Our Energy Experts specialise in C&I energy procurement. We manage your entire tender process - from analysing your current consumption profile and load patterns, to sourcing quotes across leading retailers, to negotiating the best terms and locking in at the right time.

We do the legwork so you can focus on running your business. And we keep looking after you long after the contract is signed, with account support and automatic reviews when renewal approaches.

Ready to win on your next energy contract? Get in touch with a Zembl Energy Consultant today. We'll discuss your situation, review current market conditions, and find the timing and structure that works for your business.