TL;DR: The Default Market Offer (DMO) in NSW, SA, and SE QLD, and the Standing Offer (SSO) in Victoria, are regulated default electricity prices often higher than competitive market offers. For solar households, being on a DMO/SSO typically means receiving significantly lower feed-in tariffs, leading to reduced savings and a higher annual electricity bill than necessary.
What is Australia's Default Market Offer (DMO) and who does it primarily affect?
Australia's Default Market Offer (DMO) is a regulated maximum price cap on electricity bills for residential and small business customers who haven't actively chosen a specific market offer from their retailer. It was introduced by the Australian Energy Regulator (AER) in 2019 to protect customers from unnecessarily high prices, particularly those who are disengaged or whose contracts have expired and rolled onto standard, often more expensive, retail offers. The DMO currently applies to customers in New South Wales (NSW), South Australia (SA), and South-East Queensland (SE QLD).
Why was the DMO introduced?
The DMO was established to ensure that customers who don't or can't actively shop around for energy plans still have access to a fair and reasonable electricity price. Before its introduction, many customers would passively remain on standing offers (default plans) that were significantly more expensive than the best available market offers. The DMO acts as a safety net, setting a reference price that retailers must not exceed for their default plans, and also serves as a benchmark for comparing other market offers. Retailers are required to clearly show how their market offers compare to the DMO price.
How does the DMO structure impact your bill?
The DMO sets out the maximum annual bill for a typical residential customer in a given area, factoring in daily supply charges, usage charges (often time-of-use or single rate), and a minimum feed-in tariff (FiT) for solar customers. While it provides a ceiling, it's generally not the cheapest offer available. For instance, a household on a DMO in Sydney might face a daily supply charge of around $1.10 and peak usage rates of $0.35/kWh, with a FiT of just $0.05/kWh. Staying on a DMO can mean missing out on savings from more competitive market offers that might have lower usage rates or significantly better feed-in tariffs.
How does the Default Market Offer (DMO) compare to Victoria's Standing Offer (SSO)?
While both the DMO and Victoria's Standing Offer (SSO) serve as default pricing mechanisms for electricity consumers who haven't selected a market offer, they operate under different regulatory frameworks and apply to different states. The DMO, set by the Australian Energy Regulator (AER), covers NSW, SA, and SE QLD. In contrast, Victoria's Standing Offer (SSO) is determined by the Essential Services Commission (ESC) Victoria and applies exclusively within the Victorian energy market. Both aim to protect consumers from excessively high prices, but their specific components, particularly around feed-in tariffs, can vary.
Understanding the Victorian Default Offer (VDO) / Standing Offer (SSO)
In Victoria, the equivalent of the DMO is officially called the Victorian Default Offer (VDO), but is often referred to interchangeably with "Standing Offer" or "SSO" in common parlance. Like the DMO, the VDO sets a maximum annual price for electricity for residential and small business customers who do not choose a market offer. The ESC Victoria reviews and updates the VDO annually, ensuring it reflects the efficient costs of electricity supply. For a typical Victorian household, this might mean a daily supply charge of $1.20 and peak usage rates around $0.28/kWh, along with a minimum FiT. While the VDO acts as a safety net, competitive market offers often provide better value, especially for solar owners.
Key differences in solar feed-in tariffs
A significant difference for solar homeowners lies in the feed-in tariffs (FiTs) offered under these default arrangements. Both DMO and SSO typically mandate a minimum FiT, which is often much lower than the rates available on competitive market offers designed to attract solar customers. For example, a DMO might offer a minimum FiT of $0.05-$0.07/kWh, while the Victorian VDO might set a minimum FiT closer to $0.065/kWh. However, many market offers specifically target solar users with FiTs ranging from $0.08-$0.15/kWh, or even higher in some periods. Sticking to a default offer means you're likely losing out on substantial credits for the excess electricity your solar panels export to the grid.
What financial impact does being on a DMO/SSO have on your solar-equipped home?
Being on a Default Market Offer (DMO) or Standing Offer (SSO) with solar panels can significantly reduce your potential savings and increase your annual electricity bill compared to choosing a competitive market offer. The primary reason for this diminished benefit is the typically low feed-in tariffs (FiTs) offered under these default arrangements. While your solar system is generating clean energy and reducing your reliance on grid electricity, the financial reward for exporting surplus power back to the grid is minimal when on a DMO or SSO. This impacts the overall return on investment for your solar system and prolongs its payback period.
Lower feed-in tariffs diminish solar savings
The most direct financial impact comes from the difference in feed-in tariffs. For example, if your DMO or SSO provides a minimum FiT of $0.06/kWh, but you could switch to a market offer with a FiT of $0.12/kWh, you're effectively losing $0.06 for every kilowatt-hour your system exports. A typical 6.6kW solar system might export 3,000-5,000 kWh per year. At a $0.06/kWh loss, this equates to an annual reduction in credits of $180 to $300. Over the lifespan of your solar system, these losses can accumulate to thousands of dollars, making your investment less profitable than it could be.
Higher usage and supply charges
Beyond the lower FiTs, DMOs and SSOs often come with higher daily supply charges and usage rates compared to many market offers. While your solar system will help offset your usage, you'll still draw from the grid during peak times or when your system isn't generating enough power (e.g., at night). If your DMO/SSO charges $0.32/kWh for peak usage and a market offer charges $0.28/kWh, those differences add up. Even if your solar system covers 80% of your daytime usage, that remaining 20% (plus night-time usage and daily supply charges) will be more expensive on a default plan, further eroding your potential savings and increasing your annual bill.
How can solar homeowners effectively switch away from DMO/SSO rates?
Solar homeowners have several straightforward strategies to move away from the often uncompetitive rates of Default Market Offers (DMOs) and Standing Offers (SSOs) and maximise their system's financial benefits. The key is active engagement with the energy market, understanding your consumption and export patterns, and comparing available plans. By taking a proactive approach, you can significantly enhance your solar system's return on investment and reduce your annual electricity expenses.
Utilise government energy comparison websites
The most effective first step is to use government-backed energy comparison websites, which are free, impartial, and provide comprehensive listings of plans. For NSW, SA, and SE QLD, this is Energy Made Easy (energymadeeasy.gov.au), run by the AER. For Victoria, it's Victorian Energy Compare (compare.energy.vic.gov.au), run by the ESC. These platforms allow you to input your specific details, including your solar system size and estimated annual usage/export, to find plans tailored to your needs. Pay close attention to both the usage rates, daily supply charges, and crucially, the feed-in tariff offered. Look for plans specifically marketed towards solar customers, as they often have more generous FiTs.
Negotiate with your current retailer or switch providers
Once you've identified a few competitive market offers, don't hesitate to contact your current electricity retailer. Many retailers are willing to negotiate or offer a better deal to retain your business, especially if you present them with a more attractive offer from a competitor. If your current retailer can't match or beat the best available plans, switching providers is a simple process. Your new retailer will manage the transition, usually without any interruption to your power supply. Ensure you confirm any exit fees with your current retailer if you're still within a contract period, although DMO/SSO customers typically don't have such fees.
Key Takeaways
- The Default Market Offer (DMO) and Standing Offer (SSO/VDO) are regulated default electricity plans for customers who haven't chosen a specific market offer.
- DMO applies to NSW, SA, SE QLD (AER); SSO/VDO applies to Victoria (ESC).
- These default plans typically offer significantly lower feed-in tariffs for solar exports and potentially higher usage/supply charges than competitive market offers.
- Being on a DMO/SSO with solar can cost you hundreds of dollars annually in lost savings from lower feed-in tariffs.
- Use government comparison websites like Energy Made Easy or Victorian Energy Compare to find better market offers.
- Actively shop around and be prepared to switch retailers or negotiate with your current one to secure better rates and higher solar feed-in tariffs.
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For a comprehensive overview, check out our master guide: Read the Full Guide Here.
