The Australian Energy Regulator has increased the Default Market Offer (DMO), also known as the reference price, by between 19.6%–24.9%.  

The increase, outlined in the AER’s final determination released in May will affect residential homes in south east Queensland paying default power prices, as well as small businesses, paying 21.5% and 21.6% more respectively.

The news comes as many Queensland households are already feeling cost-of-living pressures, with RACQ Bank research revealing close to 50% of Queenslanders are not confident in their financial situation and have no savings left after paying bills and other expenses.

To help our members better understand the drivers for this complex change, we look at the history of the DMO, how it works, who manages it and what you can do to reduce the impact of rising electricity costs.

What is the Default Market Offer (DMO)?

Introduced by the Federal Government in 2019, the DMO is a price cap for electricity retailers selling to residential and small businesses on default contracts in New South Wales, South Australia and south east Queensland – all areas where prices are market driven. The price is based on specific usage and supply charges in different areas, meaning the reference price will vary between states and distribution networks.

According to the AER, the price of the DMO is based on the efficient cost of operating in the region which includes the cost retailers pay generators for electricity and to have it transported to Australian homes and businesses along poles and wires, the cost of complying with Government environmental schemes and the cost to serve customers and make competitive offers.

It is adjusted annually to ensure it stays in line with changes in the energy market.

The other purpose of the DMO is to make energy plans easier to compare, as it acts as a reference point to other plans in the market.

Consumers can use the DMO to compare retail plans by looking at the percentage difference between the offered price and the DMO.

The bigger the difference, the better the offer. You can compare energy plans from different electricity companies by visiting energymadeeasy.gov.au.

It’s important to note, electricity bills in regional Queensland fall under the Queensland Government-owned Ergon Energy, meaning the DMO price safety net does not apply.

However, Ergon’s pricing is still subject to approval by the AER and its prices are projected to also rise this year.

Why are prices on the rise?

The cost of generating electricity in the wholesale markets accounts for around 30–40% of the total DMO price and is the biggest driver of the projected 20.5% to 21.5% increase for residential customers in south east Queensland, according to the AER.

Based on this increase, south east Queenslanders’ energy bills are predicted to increase by $349–$402 per annum (depending on their contract), while small businesses will experience a $756 jump.

The AER said in a statement: “Energy prices are not immune from the significant challenges in the global economy right now; that’s why it’s more important than ever that we strike a balance in setting the DMO to protect consumers as well as allowing retailers to continue to recover their costs and innovate.”

Energy relief payments

In the 2023/24 Federal Budget, the Federal Government announced an ‘Energy Relief Payment’ which is essentially a rebate.

In Queensland, eligible households will receive a $500 annual energy rebate on their power bill and small businesses will be able to access a $650 rebate.

Generally speaking, people already receiving a Centrelink payment, such as s pension, family tax benefit Part A or B or a holding a Heath Care Card or DVA card will be eligible.

If you are eligible, the key thing to remember is that money will be taken off your power bill, it will not be paid into your bank account.

What should I do now?

If you have concerns about the price you’re paying for electricity, the best thing you can do is to speak to your retailer. Ask them if you’re on a standing offer, and what options you have to review your contract.

Don’t be afraid to shop around. This is a competitive market, and you may be able to get a better deal from another retailer.

Also, consider if a time-of-use (TOU) tariff (which applies different prices for electricity at different times of the day) would work for you and try to remember to turn off power points when you’re not using them.

Finally, with prices on the rise, consider if solar is a viable option for you and your family.

If you have solar panels and a home battery to store the power your system generates, you should see a significant reduction in your power bills.  

Learn more about RACQ Solar