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Understanding the DMO and VDO: Your Guide to Navigating Australia's Electricity Price Increases in 2023

As we rolled into the financial year of 2023, energy regulators in Australia dropped the news on the Default Market Offer (DMO) and Victorian Default Offer (VDO) drafts, hinting at soaring energy prices for small businesses. The final verdict on this, following extensive consultation with stakeholders, was released on May 26.

Before we dissect the implications of this ruling, let's ensure we're all on the same page regarding the DMO and VDO.

What Exactly Are the DMO and VDO?

The Default Market Offer, or DMO, is essentially an electricity price safety net. This benchmark, set forth by the Australian Energy Regulator (AER), is designed to shield households and small enterprises on standard retail plans from unreasonably high electricity prices in New South Wales, South Australia, and South-East Queensland.

On the other hand, the Victorian Default Offer (VDO) serves a similar purpose, but it specifically applies to Victorian consumers. The critical distinction between the VDO draft and the DMO draft lies in the issuing entity. VDO draft is dispensed by Victoria's energy price regulator, the Essential Services Commission.

The Final Verdict on DMO and VDO: Comparing the Drafts and Final Announcements

Small business owners were met with alarming news in the DMO and VDO drafts released in March. The drafts revealed significant price increases, particularly in Victoria where electricity bills could potentially skyrocket by a staggering 33%.

However, the final determinations brought a mixed bag of news. Input from stakeholders and refined cost estimations have nudged the prices lower in some regions, while inflating them in others.

Here's a breakdown of the final approved price hikes for small businesses by VDO and DMO regulators:

  • Victoria: An average increase of 25% (as opposed to the draft estimate of 33%)
  • New South Wales: An increase ranging between 14.7% and 21.6%, depending on the region. (The draft estimated a rise between 14.7% and 19.9%)
  • Queensland: An increase of 21.9% (up from the draft estimate of 19.9%)
  • South Australia: An increase of 28.9% (compared to the draft's 25.4%)

These figures suggest that while small businesses in Victoria might exhale a small sigh of relief, those in Queensland, New South Wales, and South Australia may face tougher financial strains.

Navigating the Rising Prices: What Can You Do?

To counteract these price surges, ensuring you're on the best possible electricity plan is paramount. Despite the financial strain resulting from escalating wholesale energy costs, some retailers are managing to provide superior deals.

Claire Savage, Chair of AER, underscores this point. She stated, "In setting the DMO price this year, we have sought to protect consumers from unjustifiably high prices and at the same time allow retailers to offer consumers better deals than their standard plans. No one wants to see rising prices, and we recognise this is a difficult time - that's why it's important for consumers to shop around for a better deal.”

At Energy Action, we're here to help businesses deliver on their energy procurement strategies. Our team of energy experts specialise in business energy procurement, cost reduction, and emissions minimisation. We are well-equipped to help you find the best deal amidst these challenging times.

Ready for change? Contact us.

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