Customers have had a choice between two types of electricity contracts – Standing Offers and Market Offers.
Market Offers are those set by the energy retailers themselves and often include big discounts and incentives for customers to save for an agreed term.
Standing Offers, on the other hand, are your basic electricity deals, with no discounts and are typically more expensive than discounted market offers, and so are only intended to be used as the fall-back option when a customer’s electricity deal expires.
A benchmark is to be introduced to provide clarity for consumers and overcomes the issue of large and potentially misleading discounts which may hide inflated electricity prices.
The energy market is introducing the ‘Default Market Offer’ (DMO) from 1st July 2019. The default market offer will also serve as a basis for calculating the ‘reference bill’ intended to serve as a reference point for energy retailers marketing their prices to residential customers and small businesses, in South-East Queensland, New South Wales, South Australia and the ACT.
Default Market Offers will be similar to current Standing Offers, however the default price will be set by the government and is expected to be lower than the standing price.
The default price is the maximum price that retailers will be allowed to charge customers for electricity. It will serve as a form of ‘safety net’ for consumers, ensuring that loyal customers who stick with their retailer are not penalised once their original deal comes to an end.
The default market offer should make electricity cheaper for some Australians, while the reference bill is intended to make it easier to shop around for a better deal.
Customers should be warned that the introduction of the DMO, will not deliver meaningful bill reductions without individual market engagement.
Customers are advised to compare their local area service providers for the best deal available to them.
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