Explained: July 1 Energy Changes
On July 1 2019, the energy market made the biggest changes to electricity offers in a generation.
Here is what you need to know.
A typical 4-person household uses 7320kWh of Electricity a year, which would cost $1963 on Alinta Energy’s Home Saver Plus residential plan.
But if the same household was getting no discount, they could pay as much as $2427 with Origin Energy, $2489 with AGL or $2511 with Alinta.
That’s over $500 difference in the case of the un-discounted AGL and Alinta plans.
What has changes on July 1?
The Government has changed how electricity offers have to be described from July 1, 2019. The Government has created a new ‘default offer’ or ‘reference price’, and all discount offers have to be compared to that. For example: ‘This offer is 10% less than the Reference Price’.
It’s become too hard to compare electricity deals because every retailer had different discounts and different rates. The Government has acted to try and make it easier to make apples-for-apples comparisons to find the cheapest deal.
What is the ‘default offer’ or ‘reference price’?
From July 1 2019 electricity retailers are required to offer customers:
– in NSW, SEQLD and SA, a “Default Market Offer” (DMO), and
– in VIC, a ‘Victorian Default Offer’ (VDO.
These new reference prices create a new benchmark annual bill amount for an average household in each electricity Distribution Zone. Those customers currently on a Standing Offer (rather than a Market Offer) will be moved to the new (cheaper) ‘default offers’ or ‘reference prices’ on 1 July. However, 80-90% of Market Offers will still be cheaper than the new ‘default offer’ or ‘reference price’ – so it will still pay to shop around.
The aim of the 1 July changes is to provide a consistent point of reference for customers to compare plans.
How much is the ‘default offer’ or ‘reference price’?
The electricity Reference Price for each electricity distribution zone in NSW, SEQLD and SA is set by the Australian Energy Regulator (AER). In Victoria, it is set by the Essential Services Commission (ESC). It is never set by the electricity retailers.
It ranges from about $1300 p.a. to about $1900 p.a for a household with average usage depending on the zone you live in. You can read more information about how these prices have been set by going to the AER website or the ESC website.
What is my reference price?
It will depend on where you live because Reference Prices are set for each electricity Distribution (Distribution Business – “DB”) Zone.
|STATE||POSTCODE||DB ZONE||REFERENCE PRICE||AV kWh p.a.|
|SA||5000||SA Power Networks||$1,941||4000|
Prices do vary according to your region because the cost of supplying electricity (that being the poles and wires), varies from region to region around the country.
What will my actual electricity bill be?
It will depend on your actual electricity usage.
How will the ‘default offer’ or ‘reference price’ affect me?
The new benchmarks will affect everyone differently.
In NSW, SEQLD and SA you should be contacted by your retailer to let you know if your rates are changing on July 1, 2019.
If you are currently on what’s called a Standing Offer, you will be automatically moved onto the ‘default offer’ or ‘reference price’ by your retailer on July 1. This will be at cheaper rates than you were on previously.
If you are currently on a Market Offer (receiving some form of discount, or low rates) you will not be automatically affected. But it will now be easier for you to compare market offers.
I live in the ACT, WA or NT, will the DMO/VDO apply to me?
ACT – No – the DMO does not apply to the ACT, as regulated prices are already available.
WA and NT – No – you will not be affected by the new default offer as different rules and regulations apply in these jurisdictions.
Is the ‘default offer’ or ‘reference price’ the cheapest option?
No. Those on Standing Offers who will be automatically moved onto the ‘default offer’ or ‘reference price’ will pay less for electricity from July 1.
But the majority of Market Offers will still be cheaper than the reference price, so it still pays to shop around and switch.
I am on a Standing Offer at the moment. How much will I save by being transferred to the ‘default offer’ or ‘reference price’?
A typical household in NSW, SEQLD or SA will save between $118 to $181 per year depending on where you live:
|DISTRIBUTION ZONE||EST. SAVINGS P.A. (AER)|
|ENDEAVOUR ENERGY (NSW)||$175|
|ESSENTIAL ENERGY (NSW)||$181|
|SA POWER NETWORKS (SA)||$171|
A typical household in VIC will save between $386 to $516 per year depending on where you live:
|DISTRIBUTION ZONE||EST. SAVINGS P.A. (ESC)|
How do I know if I’m on a Standing Offer?
A standing offer is one that has no discount.
Often people find themselves on Standing Offers if they choose not to engage (by selecting a plan with a retailer) with the electricity market
A common case is when someone moves into a new house and the electricity is already connected.
Another common scenario is when a customer’s discounted-offer market contract expires and they are moved back onto a Standing Offer (which have been more expensive than market offers).
Do the changes affect gas and solar?
No – these reforms only affect the electricity market at this stage.
Why do the discounts look smaller than have been marketed previously?
The discounts look smaller because electricity retailers can no longer headline their offers with the sort of big pay-on-time discounts we’ve become used to. Instead electricity advertisements must now say how much more or less each offer will cost compared with the relevant “Reference Price” or “Victorian Default Offer”.
In NSW, SEQLD & SA, electricity retailers must include in their ads the annual bill amount for a typical household.
In VIC, energy retailers must include their ‘best offer’ in all bills from now on.
Why was the government’s new fair price introduced?
The Default Market Offer (for SEQLD, NSW and SA) was introduced by the Federal government to reduce Standing Offer prices for electricity and make it easier for customers to spot a better deal.
The Victorian Default Offer was introduced by the VIC Government after an independent review into electricity prices found that Victorians were paying more than they should for electricity. It is part of the state government’s Energy Fairness Plan.