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Surprise mid-year price hike coming to Victoria amid energy market shake-up

5 min read
21 Jul 2021
young couple talking about the Victorian default offer

An unexpected price hike is on the way for some electricity customers in Victoria, with the state’s energy regulator confirming a surprise out-of-cycle adjustment to the Victorian Default Offer (VDO) on 1 September.

The Essential Services Commission (ESC) has advised residential customers on the flat VDO tariff that they will see their electricity costs increase by up to $6 a month from 1 September to 31 December, while most small business customers on flat VDO tariffs will see increases of between $12 and $32.1 It follows a decision by the Australian Energy Regulator (AER) to allow Victoria’s energy distribution businesses to increase their network charges from 1 July.1

In the past, both network and VDO charges were adjusted on 1 January, meaning the new VDO price increase may be unexpected for many customers.

The VDO is the highest price customers will pay for electricity if they are not on a market contract (ie haven’t negotiated discounts with electricity providers or taken advantage of better deals on the market). Essentially, the VDO is a fair but standard price that providers can charge you for electricity. Customers are usually better off on market offers, which are generally cheaper than VDO contracts and offer other perks or rewards.

New rates to apply from 1 September for residential customers on the VDO

Distribution Zone2021 VDO monthly bill priceUpdated VDO monthly bill price (from Sep)Difference
AusNet Services$126$130+$4
Citipower$106$112+$6
Jemena$111$116+$5
Powercor$114$119+$5
United Energy$110$113+$3
Source: Essential Services Commission – ‘Victorian Default Offer amendment to price determination 2021 – Final Decision (P26)’ – Accessed 19/07/2021|
NB: The figures above are based on the estimated monthly bill based on the 2021 VDO prices outlined by the ESC. These are the prices for an average residential user in these distribution zones, assuming an annual usage of 4,000kWh, with the monthly usage assumed to be spread uniformly across the year.

New rates to apply from 1 September for small business customers on the VDO

Distribution Zone2021 VDO monthly bill priceUpdated VDO monthly bill price (from Sep)Difference
AusNet Services$574$602+$28
Citipower$411$423+$12
Jemena$438$470+$32
Powercor$425$441+$16
United Energy$439$433-$6
Source: Essential Services Commission – ‘Victorian Default Offer amendment to price determination 2021 – Final Decision (P26)’ – Accessed 19/07/2021
NB: The figures above are based on the estimated monthly bill based on the 2021 VDO prices outlined by the ESC. These are the prices for an average small business user in these distribution zones, assuming an annual usage of 20,000kWh, with the monthly usage assumed to be spread uniformly across the year.

While these increases may seem small, Compare the Market’s Energy Expert and General Manager of Utilities, Brett Mifsud, said now might be the right time for Victorians to look for a better electricity deal and lock-in their electricity rates to keep costs low.

“People should think about energy pricing in the same way they think about their home loan rates, because just like a change to the official cash rate often impacts the interest rates everyone pays on their mortgages, when the energy regulators change the default electricity price, retailers are known to adjust the pricing of market offers, too,” Mr Mifsud said.

“This price rise won’t just be felt by households on the default tariff, it’s likely the retailers will also gradually adjust the pricing on market offers, too. And increases may be greater than just reflecting the change to the VDO.

“When interest rates are on the rise, people think about locking in their home loan. The same applies to energy. There are plenty of fixed rate electricity plans on the market which provide a bit more certainty over how much you will pay in the coming months.”

It’s important to note that when the VDO has decreased in the past, some market offers have also reduced. That’s because the VDO is an electricity baseline that all market offers use as a reference price for discounts, meaning market offers can fluctuate in line with the VDO. Energy providers set their own prices for market offers, which is why it’s important to see if you’re on the best electricity deal.

While flat VDO tariff customers will see their monthly prices increase for the rest of 2021, it’s not all bad news. ESC Pricing Director, Marcus Crudden, explained that VDO customers would still fork out less on electricity this year than they did in 2020.

“A household on the default offer will still pay around $140 less over this year, compared to 2020,” he said in a statement.2

The ESC is currently reviewing the VDO prices that will apply from 1 January next year, with a draft decision due in September and a final decision to be released in November.3

Mr Mifsud said it was a good idea to get into the habit of checking your electricity bill regularly and ensuring you’re not paying more than you need to for power – especially with changes coming into effect at different times this year.

“We would encourage all customers to shop around to see whether they can get a better deal,” he said.

“The reality is that the energy market can change quickly and you can go from being on a competitive offer to an expensive one in a matter of months, so you will need to compare regularly to make sure you are still getting a good deal.”

If you want to look for a better electricity plan or compare your options, we can help. Our free energy comparison tool allows you to compare a range of providers, plans and features in minutes.

Sources

1.Essential Services Commission – ‘Victorian Default Offer amendment to price determination 2021 – Final Decision’ – Accessed 19/07/2021|
2. Essential Services Commission – ‘Increased costs for retailers mean a small rise in default electricity price’ – Accessed 19/07/2021
3. Essential Services Commission – ‘Victorian Default Offer price review 2022’ – Accessed 19/07/2021

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avatar of author: Phillip Portman

Written by Phillip Portman

When he’s not busy writing, Phillip can usually be found at the movies, riding rollercoasters at theme parks, hanging out with his cockatiel Tiki, or talking about everything pop culture. He has a Bachelor of Arts in Communication and Journalism and has previously written about health, entertainment, and lifestyle for various publications. Phillip loves to help others and hopes that people learn something new from his articles.

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