The Victorian default offer explained
Do you want a fair electricity deal in Victoria? The Victorian default offer may be your best option. You can access simple and trusted electricity prices set by the Essential Services Commission and not by energy companies.
The Victorian default offer allows electricity consumers in Victoria to access fair electricity deals. This is particularly important for those who are not willing to engage in the retail market.
This article shares a quick explanation of the Victorian default offer.
What is the Victorian default offer?
Also known as the VDO, the Victorian default offer is the cost of electricity pricing that must be applied to all standing offers. Although the VDO often doesn’t provide the lowest price available for customers, it serves as a safeguard for consumers by setting the maximum price that customers in Victoria will get charged for an average amount of usage.
The Victorian default offer serves as the basis for the reference price that electricity providers in Victoria must compare their rates to. The companies must publish their rates in the advertising materials they release. This allows Victorian customers to evaluate the electricity deals being offered to them.
To ensure that the Victorian default offer is up-to-date, the Essential Services Commission (ESC) reviews its price yearly after it assesses the costs that energy retailers need to recover to be able to continue providing electricity to their customers in Victoria.
Victorian default offer for households and small businesses
Households and small businesses are entitled to ask for a Victorian default offer and electricity retailers must provide the VDO to those who request it; however, even though the VDO must be made available, this doesn’t prevent electricity providers from offering customer contracts that are different from the VDO.
NOTE: Small businesses may ask for a Victorian default offer if their electricity consumption is less than 40-megawatt hours per year.
The price of the VDO
The VDO is a set tariff. It is inclusive of a daily supply charge and usage charges (per kilowatt-hour) that are based on the distribution zone. These distribution zones are set depending on which area an electricity company distributes power to. The VDO is not based on the energy retailer chosen by an electricity customer. Tariff differences across distribution zones reflect the costs needed to provide electricity services in each area.
The importance of VDO for electricity providers in Victoria
Energy providers use the Victorian Default Offer as the base rate for the reference price. The VDO serves as a basis for comparison when advertising their energy plans.
Default offers for other states
While the Victorian default offer is exclusive to Victorians, there are separate reference prices set by the Australian Energy Regulator. These references apply to other states, such as New South Wales, South Australia, and South East Queensland.
The Victorian default offer may not provide the lowest price available for electricity consumers, but it ensures that the average user will not be charged more than the maximum price set if they are on the VDO.
The best electricity plans and deals would still depend on the requirements of your household or small business. Along with your requirements, there are other considerations such as supply charges and fees that come with the electricity plan of your choice.
Fortunately, Electricity Wizard makes it easier for you to get a better offer. Use our free online energy comparison tool to find the right energy plans and a better deal.