The reference price: What is it and how does it affect you?

What is the electricity reference price or Default Market Offer?

The Default Market Offer (DMO) or reference price is the maximum price that electricity retailers can charge for standing offer plans. A standing offer is the basic, default plan you'll be put on if you don't sign up to something different or you have been on the same plan for a long time.

The DMO was introduced by the Australian Energy Regulator in July 2019 to simplify the energy market, making it more transparent and easier for consumers to navigate.

Electricity retailers in New South Wales, South East Queensland and South Australia are required to advertise their plans against this maximum or 'reference' price, making it easier for customers to compare plans from different retailers. The exact reference price depends on where you live.

How does it work?

There are two parts to the reference price: a price cap (the DMO) and new advertising requirements.

The price cap or maximum price

The energy regulator has set a price cap for standing offers, meaning retailers can't charge customers more than the reference price for standing offers.

This price cap doesn't apply to customers on market offers. However, market offers often include discounts, special prices and cheaper rates than the DMO.

More transparent marketing

Energy retailers in New South Wales, South East Queensland and South Australia used to be able to advertise discounts that were calculated from different base rates. This made it challenging to compare discounts from different retailers.

With the new reference price, energy retailers must advertise pricing and discounts in relation to the reference price, leading to more transparent pricing and easier comparison. If two retailers offer 20% discounts, you know the discounts are equivalent because they are calculated from the same base rate.

What's the difference between the reference price and the Default Market Offer?

The reference price and DMO are often used interchangeably, since both terms refer to a single price, as explained above. Reference price is used for either case, while the DMO mostly refers to the price cap on standing offers.

How does the reference price affect you?

If you live in New South Wales, South East Queensland or South Australia, it might affect you. Victorian customers may be affected similarly by the Victorian Default Offer.

There are two different types of electricity plans in Australia: standing offers and market offers. It only directly affects standing offer customers.

Standing offers vs Market offers

If you're comparing energy you may have come also across the following terms: Standing offers and Market offers. Our infographic below helps explain the difference.

Picture: GettyImages

Standing offers

Almost 800,000 residents in New South Wales, South Australia and South East Queensland are on standing offer electricity contracts. If you were on a standing offer when the new regulations took effect, you might have seen an adjustment in your rates. If you have since joined a standing offer, you can be assured your rates won't exceed the max set by the DMO.

Depending on where you live, an average household on a standing offer could save between $129 and $181 per year, and a small business could save up to $896 per year.

Market offers

If you're on a market offer, the DMO doesn't apply to you.

However, retailers must calculate their advertised prices from the same base rate, allowing equivalent comparison of prices from different providers quickly and easily.

Sample plans:

Keep in mind, while the reference price helps you compare plans and providers, you might end up paying more or less than the advertised rate depending on your usage.

How to switch energy providers

Frequently asked questions

• Is the DMO the cheapest option?

  Not necessarily. The DMO only applies to standing offers. Depending on where you live and your energy use, a market offer could be much cheaper than the DMO. Make sure to shop around and compare a range of providers to see if there is a cheaper option.

• How do I know if I am on a standing offer or market offer?

  If you're not sure what type of offer you're on, you can check your latest electricity bill or contact your energy retailer and ask.

  Typically, customers who have had the same retailer for years and haven't changed their plan during this time are likely on standing offers.

• Does my pay-on-time discount still apply?

  It depends on the type of plan you're on. The reference price changed the way retailers are required to advertise discounts, but the specific discounts available to you depend on the plan and the retailer.

  To find out what discounts apply to you, contact your retailer directly.

• What about other states?

  The Victorian government introduced a price cap for the state on 1 July 2019, also known as the Victorian Default Offer (VDO). The VDO works similarly to the DMO as a maximum price for standing offers.

  The electricity markets in Tasmania, Western Australia, Northern Territory, regional Queensland and the Australian Capital Territory are regulated by state governments and other authorities.

• Does the reference price apply to gas or solar?

  No, the reference price only applies to electricity plans.

How you can use the reference price to compare energy prices

How to save on your energy bill