The Victorian Default Offer (VDO) is final: Power bills set to fall

Victorian households rejoice! The Essential Services Commission (ESC) has confirmed an average 5% or $84 drop in the annual reference price across all five electricity networks. 

These changes are set to take effect on July 1st. 

What is the VDO 

Every July 1st, the ESC resets the electricity reference price in Victoria, representing the maximum price a retailer can charge on standing offers —  mandatory plans customers are moved onto when their previous plan expires. 

The reference price protects Victorians from paying ‘too much’ for electricity. It’s also a comparison price for assessing other plans and their features. 

The VDO accounts for factors like wholesale, network, retail costs and annual electricity use estimates (e.g. 4,000 kWh per year).

The upcoming reduction to the VDO is attributed to drops in wholesale, network, environmental, retail margin and GST costs.  

How much less Victorians could pay for electricity from July

Flat rate tariffs

A flat rate (or single rate tariff) charges the same usage rate (the price of every kilowatt hour of electricity used) regardless of the time of day. 

Victorians on flat rate plans can expect to save between $50 and $160 in the 2026-27 financial year, depending on the network they live in. 

The ESC is also introducing a rate cap on daily supply and charges, further safeguarding Victorians from potentially skyhigh rates. 

Supply charges, unlike usage charges, are a daily fixed cost customers pay to remain connected to the grid. 

If you have an energy-intensive appliance, you may be on a controlled load tariff, which independently meters that appliance at a lower usage rate (as shown above). 

Three-period time of use plans

A Victorian first, the ESC is introducing a reference price for time of use (ToU) tariffs, giving Victorians the flexibility to cross-compare tariffs. 

A ToU tariff charges different electricity rates at different hours. Because this is a new category, there is no previous reference price to compare against. 

However, the ESC has also introduced price ceilings on ToU tariff rates. 

Unlike flat rate tariffs, usage prices vary during peak and off-peak periods, when demand on the grid is higher and lower respectively. 

In addition, a ‘solar soak’ period offers subsidised usage rates when solar generation is at its peak, encouraging customers to run energy-intensive appliances during this period. 

What else should I know about the VDO? 

On top of default pricing changes, Victorians can expect to see the rollout of these reforms. 

Starting July 1st

• Customers who have been on the same plan for more than four years must be paying reasonable rates. 
• Retailers must help customers apply for relevant concessions and rebates, such as the Utility Relief Grants.

Starting October 1st

• Automatically move customers onto the provider’s cheapest plan.
• Must keep customers with less than $1,000 in electricity bill debt connected. 
• The launch of the ‘Midday Power Saver’ scheme, offering three hours of free electricity in the middle of the day. 

How does the VDO impact your power bill?  

Currently, 17% of Victorians are on a standing offer. Once July 1st passes, they can immediately save a maximum of $160 for the 2026 - 2027 financial year, depending on their distributor. 

However, it’s important to remember that reference prices reflect the ‘most’ you should be paying for electricity. Switching to a market offer could save you hundreds annually. 

Unlike standing offers, market offers boast cheaper rates and features set by the retailer. 

Retailers refer to the VDO as a starting point for setting prices on their market offers. If the VDO drops, they’ll typically lower the rates on all of their market offers to coincide with the VDO cutover. 

Keep in mind that retailers may take a few weeks to update their market offers’ prices. That’s why it’s crucial to compare electricity plans after the July 1st changes to make sure you’re on a good deal. 

What should I do next? 

There’s still more than a month away from July, so pay attention from July onwards, but don't switch straight away until the dust settles. 

If you aren’t actively engaging with the energy market, you might already be on a standing offer if your previous plan has already expired. 

If you’re not sure, you can read your power bill to see which plan you're on. If you’re on a standing offer, you can easily switch to your retailer’s cheapest plan, which is spelt out on your bill’s ‘best offer’ section. 

According to the ESC, 61% of Victorian electricity customers are not on their provider’s lowest cost plan.

All you have to do is contact your retailer or switch via their online portal in minutes.