April 9, 2026
On 19 March 2026, the Australian Energy Regulator (AER) released its draft determination for the Default Market Offer (DMO) for 2026–27, marking implementation of the first raft of reforms arising from the 2025 Department of Climate Change, Energy, the Environment and Water (DCCEEW) review of the DMO framework. The changes include a revised price‑setting methodology, new guiding principles embedded in legislation, and the introduction of additional regulated tariff types. Together, these updates reshape how the DMO is calculated and presented for the 2026–27 regulatory year and beyond.
The DMO continues to operate as the regulated standing offer and reference price for residential and small business electricity customers in New South Wales, Southeast Queensland and South Australia, with prices determined annually and applying from 1 July.
During June 2025, the DCCEEW commenced public consultation for feedback on potential reforms to the Default Market Offer (DMO). While this consultation acted as a pulse check on the DMO’s presence and effectiveness in the market, it primarily examined its ability to protect and safeguard disengaged energy customers. Following this consultation, an outcomes paper was released in November 2025 that tabled the introduction of new guiding objectives for the DMO, adjusted the approach to determining the DMO, introduced tariff caps and reinforced the role of the DMO as a reference price.This also tabled the introduction of the Solar Sharer Offer.
A central change in the 2026–27 determination from the 2025 outcomes paper, is the way the DMO is calculated. Under the revised framework, the AER is required to determine both:
- Annual DMO prices, and
- Explicit tariff caps, including daily supply charges and electricity usage rates.
The AER applies a cost build‑up methodology to set these regulated prices. This approach incorporates forecast efficient costs across four components:
- wholesale energy,
- network services,
- environmental scheme costs, and
- retail operating costs, plus a retail margin.
Within this structure, fixed costs are recovered through the daily supply charge, while variable costs are recovered through usage charges. These charges are then subject to tariff caps, limiting the maximum rates that can apply to standing offers.
For 2026–27, the AER’s draft determination indicates that DMO annual prices are expected to decrease across all distribution zones, reflecting changes in underlying wholesale, environmental and retail cost inputs as assessed under the revised methodology. However, it has also resulted in tariff caps with higher daily supply charges that currently in the market, to which the AER is seeking feedback on.
Overall, Residential flat rate DMO Tariffs have decreased by between 1.3% to 10.1%, while small business customers pricing has reduced between 8.5% and 21.2% across all DMO regions. These can be broken down as below:
- Residential: 2.7 to 8.2% lower compared to DMO7
- Small Business: 8.5 to 21.2% lower compared to DMO7
- Residential: 10.1% lower compared to DMO7
- Small Business: 12.8% lower compared to DMO7
- Residential: 1.3% lower compared to DMO7
- Small Business: 15.2% lower compared to DMO7
The 2026–27 draft determination requires the AER to determine regulated tariffs for:
- Residential and Small Business customers on flat rate Tariffs,
- Residential and Small Business customers on time‑of‑use(ToU) Tariffs,
- Residential Customers with Controlled Load tariffs,and
- Residential Customers with smart meters on a Solar Sharer Offer (SSO).
The Solar Sharer Offer is introduced as a new regulated standing offer tariff. Under the draft determination, it includes:
- three hours of free electricity usage per day during a designated daytime window,
- a daily free‑usage cap of 24 kWh, and
- regulated pricing outside the free‑usage period aligned with the applicable time‑of‑use DMO.
The free‑usage periods specified in the draft determination are:
- 11am–2pm in New South Wales and South East Queensland, and
- 12pm–3pm in South Australia.
For price‑setting purposes, the Solar Sharer Offer uses the same assumed consumption profile as the time‑of‑use DMO, allowing the AER to publish an annual price for comparison alongside other DMO tariff types.
Currently, retailers above a certain threshold of customers across the National Electricity Market (NEM) must make available a SSO standing offer for small residential customers with smart meters. There is currently no carve out for retailers selling to types of customers beyond this requirement.
The draft determination reflects changes introduced through amendments to the DMO regulatory framework following the2025 review. A key outcome of those reforms is a new statutory objective that applies to the DMO, centred on protections for small customers. In applying this objective, the AER is required to determine prices that reflect the efficient costs of supplying electricity, rather than allowing flexibility for retailers to structure tariffs provided an annual price outcome is met. This has resulted in the introduction of tariff‑level caps alongside annual prices for the first time.
The DMO continues to serve as a reference price for market offers, with retailers required to present discounts and comparisons against the regulated benchmark.
While DMO 8 presents itself in a way that is materially similar in outcome to previous DMO’s, Embedded Network Operators will need to consider the structured tariff-level caps, and the upcoming inclusion of small customers supplied in embedded networks within the DMO’s guiding objectives for DMO 9 in 2027/28.
DMO considerations apply to small customers on standing offers, with DMO 9 including those supplied by authorised retailers within embedded network arrangements, where those arrangements fall within the scope of the retail regulatory framework.
Regulated outcomes are now expressed through both annual prices and tariff caps, informed by efficient cost assessments for wholesale, network, environmental and retail components.
The publication of tariff caps provides defined limits on supply charges and usage rates associated with the DMO, rather than allowing tariff structures to vary freely beneath a single annual price outcome.
Authorised retailers selling into embedded networks, with more than 1000 customers at the cut off dates within the regulations, may need to consider solar sharer offers for their residential customers with smart meters.
For 2026–27, the AER has published DMO annual prices and tariff caps by distribution zone, reflecting differences in network cost inputs across regions. These prices and caps apply for a fixed 12‑month period from 1 July 2026.
Key dates set out in the draft determination include:
19 March 2026 – release of the draft determination,
9 April 2026 – close of submissions on the draft, and
26 May 2026 –publication deadline of the final determination ahead of commencement on 1 July 2026.
AER 2027/27 DMO 8 Draft Determination
AER Information Kit – Draft DMO 2026/27
