Victorian Default Offer and Default Market Offer prices released for 2025-26

The Australian Energy Regulator (AER) and the Essential Services Commission Victoria (ESC) have released their final decisions regarding the latest Victorian Default Offer (VDO) prices on 26^th May 2025 and the Default Market Offer (DMO) on 3^rdJune 2025 for the year 2025-26. These determinations aim to provide consumers with transparency and protection by setting maximum electricity prices, with application to embedded network customers that operators should be aware of.

Residential and small business customers within Victorian embedded networks (Local Energy Networks) are price-capped by the VDO. Conversely, customers within the wider National Electricity Market (NEM) states are indirectly benchmarked, with the DMO acting as a price cap for the standing offer of the Local Area Retailer in their distribution zone.

Victorian Default Offer (VDO) 2025-26

The VDO is designed to ensure that energy consumers have access to a reasonably priced electricity plan and a reference price to compare against. The Essential Services Commission Victoria (ESC) recently released its final decision for the VDO prices for the upcoming year, 2025-26. The Victorian Default Offer sets the maximum prices a retailer can charge for electricity sold to residential and small business customers in Victoria,who are on a standing offer. For embedded network customers, the VDO serves as a maximum price that electricity providers can set. Key highlights for 2025-26 include:

• For residential  customers on a flat tariff, the VDO is 1% higher than the previous year.
• Small business customers will see a 3% increase in their electricity VDO compared to the previous year.

These adjustments in the VDO price reflect changes in wholesale energy costs, increased network charges, and metering charges submitted to the AER. Overall, most other Victorian Default Offer cost components have remained relatively constant, noting that environmental costs in residential and small business customer bills have dropped.

Access the 2025-26 VDO here.

Default Market Offer (DMO) 2025-26

The AER has also published its final determination for the DMO prices over the same period, 2025-26. The DMO ensures that consumers on standing offers or those who have not actively engaged in the energy market are not overcharged by retailers.

Key insights from the AER's final determination on the DMO for 2025-26 include:

• Retail costs are a smaller component of the DMO (around 11% to 16% for residential customers and 6% to 9%for small businesses). However, this component has undergone the largest increases since DMO 6 (8.3% to 35.4%).
• Network costs are also a large component of DMO prices, accounting for around 33% to 48% of DMO prices. In May2025, the AER approved network tariff prices from each distribution network service provider (DNSP), which led to changes in the network component.
• Electricity affordability, which continues to be a major cost-of-living challenge for households and a significant concern for small businesses, was taken into account by the AER while setting the DMO prices, with the Consumer Price Index (CPI) serving as the primary metric.
• Since DMO 6, the AER has separately calculated a retail margin and a competition allowance. Consistent with the draft determination, it was decided not to apply a competition allowance in the final determination for DMO 7.

Access the 2025-26 DMO here.

Conclusion

The final decisions for the VDO and the DMO for 2025-26 by the ESC and the AER provide valuable insights into the evolving energy market in Victoria. The VDO for customers in 2025–26 shows relatively flat average bills compared to the previous year.

The Essential Services Commission (ESC) has proposed new rules to enhance consumer protections, including requiring retailers to move customers experiencing hardship onto their cheapest plan, transitioning customers on old contracts to a reasonable price, and increasing the minimum debt threshold for disconnection.

If you are an owner or operator seeking support to evaluate your pricing for the year ahead, ensuring compliance and profitability, reach out to our team of experts who can guide you through setting prices and understanding the financial impacts.

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