Cheaper power for households on default market offer from July

More than 60,000 SA power customers will automatically receive a power price in a couple of months – and they don’t have to do anything.

Households on the most expensive electricity deals will get cheaper power from July without needing to ask.

On average, they will save $116 a year in South Australia under the compulsory ceiling price, known as the default market offer.

The Australian Energy Regulator will announce the new prices on Tuesday.

The cuts will apply to about 64,000 SA households, or 8.7 per cent of residential customers, who have not shopped around for a better deal.

AER Chair Clare Savage said the default market offer caps the price retailers can charge electricity customers who haven’t signed up for a market offer.

“The DMO is not designed to be the most competitive deal but rather it is a safety net for customers who don’t or can’t shop around when it comes to their electricity contract,” Ms Savage said.

“Most retailers have cheaper energy deals on offer, so shopping around remains the best way to get a better price and I encourage customers to visit our free and

independent Energy Made Easy website to compare energy deals.

“While the DMO caps the price retailers can charge their customers it is still set at a level that enables retailers to recover their costs and encourages retailers to compete to offer a better deal to their customers.”

This is the third time the default market offer has been set.

Based on the average SA household using 4000kWh, the regulator first cut bills $171/year from July 2019, then a further $109/year from July 2020.

During consultation for this third default market offer, the Australian Energy Council warned the process risked harming the competitive market.

The council, which represents 22 electricity and gas companies, said the regulator was not taking full account of rising costs faced by retailers.

“The default market offer is not intended to be an offer that customers should want to be on,” council general manager Ben Barnes said in a submission to the regulator.

“It is merely intended to provide a backstop to ensure customers are not unreasonably paying too much.

“While it might seem attractive for the AER to seek to ensure the default market is as low as possible, this does not align with its policy intent and if these many incremental costs drive down a retailers headroom to an unsustainable level, risks impacting the competitive market benefits (which) customers are encouraged to access today.”

The regulator’s own analysis shows that in June 2019, an SA householder who had shopped around and signed up for a market offer at the median price would have bought their electricity for $368 less than a household which had not shopped around – or $1753/year compared to $2121/year for the same amount of energy.

By December 2020, this gap had narrowed to $256/year – with both households paying less at $1576 and $1832 respectively.

Minister for Energy and Emissions Reduction Angus Taylor said the Default Market Offer is continuing to deliver for Australians, driving down the price of energy and putting more money in people’s pockets.

“This price update confirms energy costs are continuing to fall and that is good news for hundreds of thousands of hardworking Australian families and small businesses,” Mr Taylor said.

“As we bounce back from the COVID-19 pandemic, low energy prices will help drive our economic recovery by boosting the spending ability of households and businesses.”

Originally published as Cheaper power for households on default market offer from July