Households set to pay more for their power under draft hike to Victorian Default Offer

Cash-strapped households will soon face even higher electricity bills, after the state regulator released its draft price hike. See how much more you could pay.

Victorians could pay more for their electricity bills under a draft hike to the VDO.

Victorians are set to be slugged with higher electricity costs as the state regulator proposes a hike to power bills to come into effect within a matter of months.

The Essential Services Commission (ESC) is the body responsible for setting the Victorian Default Offer (VDO) each year, which is charged to Victorians that don’t wish to shop around or lock in with an energy provider.

On Thursday, the ESC released its proposed default offer for the coming financial year, which will lift the average household’s power bill by $12 a year, taking it from $1655 to $1667.

That is based on a yearly usage of 4000kWh.

For small business with a yearly usage of 10,000kWh, annual electricity bills are set to rise by $103, rising from $3530 to $3633.

About 337,000 households (13 per cent) and 56,000 small businesses (20 per cent) are covered by the VDO, which also sets the maximum price homes and businesses within an embedded network pay.

The draft prices will be subject to a public forum before a final decision is made in May.

New prices will come into effect on July 1.

Once locked in, the VDO is likely to influence the rates of other electricity plans provider by power retailers.

The proposed $12 jump for households follows the state regulator lowering prices by $100 in this financial year, bringing welcome relief to many Victorians amid the cost-of-living crisis.

Before that, the VDO had jumped 4.5 per cent in 2022-23 before a mammoth 25 per cent hike in 2023-24 — pushing annual bills up $431 for the average household.

Minister for Energy and Resources Lily D’Ambrosio said despite the drafted price hike, Victoria continued to have “the lowest energy prices in the country”.

“On average Victorian households on the draft VDO offer will pay $449 less for their electricity than a household on the average DMO offer across New South Wales, South Australia and Queensland, while Victorian small businesses will pay $1583 less,” she said.

“Our focus is on driving down energy bills for Victorian families, which is why we called on the ESC to put households first and energy company profits second in the VDO, and why we are investing in renewable energy — the cheapest form of new build energy.”

The VDO does not provide the cheapest price for electricity. Victorians saved $260 on average by switching providers last month.

Minister for Energy and Resources Lily Lily D’Ambrosio said Victorians were paying less for electricity than in other states. Picture: aleriu Campan

The latest increase comes as many households struggle to pay their electricity bills.

A survey conducted by the Australian Council of Social Service (ACOSS) showed half of Australians were skipping food, medication or other essential bills to pay off their power bills.

“It’s a complete travesty that in one of the world’s wealthiest nations, people are getting sick, skipping meals and delaying medical appointments because they can’t afford to cool and power their homes,” ACOSS chief executive Cassandra Goldie said.

Nationally, electricity prices fell by 9.9 per cent in the December quarter and 25.2 per cent year-on-year, according to the latest data from the Australian Bureau of Statistics.

This drop was on the back of rebates from the state and federal governments, without which electricity prices would instead have risen by 0.2 per cent in December.

Under the relief fund, every household received a $300 rebate on its electricity bill in $75 quarterly payments.

Eligible small businesses received a $325 rebate.

The government was previously paying $75 a quarter on everyone’s electricity bills: NewsWire/Nadir Kinani

Survey data from Canstar Blue shows 50 per cent of Aussies think the $300 government rebate should continue in its current form, while a further 34 per cent think support should continue but it should be means-tested.

Canstar Blue data and insights director Sally Tindall said it was no surprise Aussies wanted more help as the last round of rebates were set to be removed.

“Tally up your monthly savings and put that extra cash in a safe, warm place, ready for when the reality of your real electricity bill bites,” she said.

Ms Tindall said many Australians could be overpaying on their electricity prices, as staying with a provider often meant higher prices.

According to Canstar Blue, a typical household in Melbourne could save $319 by switching from the average-priced plan to one of the cheapest.

“If the government does end up extending the electricity olive branch, don’t shy away from switching to a better energy deal – there’s plenty of other places in the budget that could benefit from the extra cash,” Ms Tindall said.

Originally published as Households set to pay more for their power under draft hike to Victorian Default Offer