The Essential Services Commission today released a draft decision for consultation that proposes increases to the Victorian Default Offer to come into effect from 1 July 2023.
The draft decision proposes an increase of around $426 for residential customers, with typical bills increasing from $1,403 to around $1,829 per year. For small business customers, typical bills would increase by around $1,738, from $5,620 to around $7,358 per year.
These increases are primarily due to significant rises in wholesale electricity costs driven by energy market volatility in 2022. This impacted the prices energy retailers paid in their futures contract arrangements to buy electricity from the wholesale market to supply Victorian consumers. Futures contract prices are used to calculate the Victorian Default Offer.
The Victorian Default Offer also must reflect network costs paid by electricity retailers to the distribution businesses. The draft decision includes an allowance for this ahead of the Australian Energy Regulator’s annual network tariffs decision due in May 2023.
Commission Chairperson Kate Symons said continuing to uphold the rights and protections of Victorian energy consumers was front of mind for the commission as the impacts of higher wholesale energy market prices begin to flow through to retail markets and consumer energy bills.
“The proposed increases to the Victorian Default Offer reflect a year of price volatility in the energy market, which is making it more expensive for energy companies to buy and supply electricity across Australia. The dollar figure increases set out in the draft decision are in keeping with proposed default market offer increases announced in other jurisdictions today.
“We understand the impacts on consumers amid a broader environment of cost-of-living concerns and we urge Victorians to take advantage of government support programs offering power price relief,” said Commissioner Symons.
Around 400,000 residential and 55,000 small businesses customers are currently on the Victorian Default Offer. It is also the maximum amount that can be charged to the approximately 150,000 Victorian consumers in embedded networks, such as apartment buildings and shopping centres.
Commissioner Symons said the draft decision does not directly impact the approximately 85 per cent of customers on retail market offers and all Victorians are encouraged to shop around to find the best deal for them.
A new round of the Victorian Government’s Power Saving Bonus will open on 24 March, providing $250 to Victorian households to help ease cost-of-living pressures and encourage consumers to compare energy offers. The bonus is available to all eligible Victorian households who visit the Victorian Energy Compare website.
Commissioner Symons said the commission will continue to use its full suite of regulatory tools to support and promote energy retailer compliance with critical safeguards in place to protect Victorian energy consumers.
“This includes retailer obligations to communicate their best offer to their customers every three or four months via their energy bill statement, and to provide assistance to customers experiencing bill stress,” said Commissioner Symons.
“If you’re having trouble paying your energy bill, ask your retailer for help. Ask about payment plans, and what concessions, rebates or utility relief grants might be available. We want Victorian energy consumers to access the assistance they are entitled to.”
The Essential Services Commission reviews the Victorian Default Offer each year. It was introduced in 2019 to provide residential and small businesses with a simple, trusted electricity offer set independently by the regulator. Since then, the Victorian Default Offer has helped some consumers to save hundreds of dollars a year on average on their energy bills compared to their previous arrangements. It provides a reference price for all consumers when comparing retail offers, but it is not necessarily the lowest price available in the market.
“While the Victorian Default Offer is a safety net for those who don’t want to or are unable to engage in the market, we encourage consumers to contact their energy retailer regularly to check if they are on the best deal,” Commissioner Symons said.