What you need to know about the Victorian Default Offer (VDO)

The Victorian Default Offer (VDO) is a reasonably priced electricity standing offer that Victorians will pay if they aren’t involved in the energy market and on a market offer. It is also the maximum amount that can be charged to Victorian households and most small businesses that are in embedded networks. Each year, this price is set by the Essential Services Commission (ESC). The idea is to protect you against energy companies that set unfair and high costs – as was often the case for standing offers in the past.

The VDO means that even if you can’t or don’t want to compare deals with electricity providers, you’ll have access to fair electricity prices. However, it may not necessarily be the lowest price available in the market. Customers can opt in or out of the VDO at any time. The VDO applies to both Victorian households and small business customers.

If you’re a residential customer on the VDO, you could compare electricity retailers with us, switch to a market offer and potentially save on your electricity bills.

The VDO was introduced after an independent review found Victorians were paying higher electricity prices than they should. The offer falls under the Victorian Government’s Energy Fairness Plan, which strives to make electricity simple and affordable for all Victorians.

Simply put, it was introduced to protect you – the customer – so you always have access to fairly priced electricity plans.

The Australian Energy Regulator (AER) has a similar initiative for the electricity retail markets in New South Wales, south east Queensland, South Australia and the Australian Capital Territory, called the Default Market Offer (DMO).

The VDO is updated on 1 July each year and will apply to 30 June of the following year. The VDO rates will differ depending on the type of tariff and whether you’re a residential or small business electricity customer. When deciding on the VDO, the ESC is often influenced by wholesale electricity costs, which can drive up prices. However, the opposite is also true – if wholesale prices go down, the VDO may also be reduced.

The price determination for VDO rates for the 2023-2024 period are listed below.

Residential customers

The table below illustrates the VDO offer for residential fixed flat tariffs with and without controlled load tariffs.

The table below illustrates the VDO that applies to residential time of use tariffs across the various Victorian distribution zones for the 2023-24 period.

Business customers

The table below illustrates the VDO that applies to small businesses who consume less than 40 MWh per year on single rate tariffs across the various Victorian distribution zones for the 2023-24 period.

The table below illustrates the VDO that applies to small businesses who consume less than 40 MWh per year on time of use tariffs across the various Victorian distribution zones for the 2023-24 period.

The VDO is a safeguard for customers who don’t want to engage in the market; as such, it won’t have any incentives or discounts. On the other hand, market offers are generally cheaper than the VDO and are usually better value since they may offer lower rates, discounts, rewards and other perks. Of course, you won’t know if you can get a better deal on your energy bills unless you compare your options.

Here are the differences between the two:

It’s important to note that because the VDO is the electricity rate baseline, all market offer discounts will reference against it, based on the same assumed annual electricity usage per year. For example, a provider will generally list the percentage difference between their market offer and the VDO.

If you’re a Victorian resident or eligible small business owner, the VDO will be available to you and you can opt in or out at any time. Remember that when it comes to market offers, electricity providers must show the annual cost difference compared to the VDO, expressed as a percentage.

The VDO is also the maximum price homes and eligible small businesses within embedded networks pay for electricity. You may be part of an embedded network if you:

• Reside in an apartment
• Live in a retirement village or caravan park
• Have a business within a shopping centre

In Victoria, electricity providers must tell you if you’re on their best electricity plan or how much you could save by switching. This information will be displayed on your electricity bill at least every three months.

Similarly, if providers are advertising discounted market offers, they’re required to display the VDO as a reference price to help you understand exactly how much you could save and whether the deal is right for you.