The new Default Market Offer explained
The new Default Market Offer (DMO) for electricity prices has been confirmed and comes into effect on 1 July 2025.
We’ve put together a simple guide on how much customers will pay, depending on where they live.
In brief, rises will be highest in New South Wales and lower in south-east Queensland and South Australia.
What are the new power prices?
From 1 July, the DMO set by the Australian Energy Regulator (AER) will go up by between $71 and $228 a year.
Broken down into a weekly increase we’re looking at between $1.37 and $4.38.
The following table shows the new average electricity bill for households, depending on where they live. These annual bills are calculated on the average energy use for each network area.
Why does location make a difference?
Different regions have different power distributers. While customers may get to choose their retailer, they can’t choose which company distributes the power.
Each of these suppliers are responsible for delivering electricity and maintaining the network, including:
Substations
Power poles
Power lines
Underground cables
The costs for each supplier will differ, depending on a whole range of factors, from population density right through to how much storm damage there has been on their network.
Prices vary from region to region, because the costs for each distributor are different
Ausgrid covers Sydney, Newcastle and the Hunter Valley.
The next cheapest, SA Power Networks, is responsible for keeping power connected for most South Australians.
Endeavour Energy covers Sydney’s Greater West, the Blue Mountains, Southern Highland, the Illawarra and the NSW South Coast.
Essential Energy’s network area has a huge footprint, distributing electricity to 95% of New South Wales and even parts of Queensland.
Energex covers south-east Queensland.
Why do we need a DMO?
The DMO was introduced to address deceptive pricing practices.
Previously, some retailers would advertise a large discount, but they would also inflate their starting price, making the discount less meaningful to consumers.
The electricity industry still refers to the DMO as the ‘Alinta Rule’.
The regulator forces every retailer to benchmark their prices to the DMO, so any discounts on offer are now against a maximum regulated price.
Under the old system, consumers were exposed to wholesale electricity market price fluctuations. When prices went up, retailers would immediately raise their rates, but when prices dropped, they could take as long as 6 months to reduce rates.
Embedded networks can lock in fixed-rate contracts for longer periods, providing more price stability and certainty for customers compared to the volatility of the DMO-based retail market.
The key factors driving power prices
Let’s drill down into what are the key factors affecting power prices.
There are three main factors:
1. Higher wholesale electricity costs
It costs retailers more to buy their electricity because:
More frequent periods of high demand
Outages at major power stations and across the network
More time where there’s less solar and wind power being generated
2. Increased network costs
It’s costing more to maintain the energy grid (eg: power poles and wires), because:
Inflation and high interest rates increase the cost of borrowing money
Damage from wild weather
Increasing cost of materials
3. Higher cost of business
Electricity retailers are facing their own cost pressures because:
Increases in unpaid bills
Smart meter rollout is expensive
Smaller retailers are spending more to attract and keep customers
Then they determine the margin (essentially the profit retailers can make) for both residential and small business customers.
It’s worth noting the retail margin of 6% and the small business margin of 11% have not changed.
That means rising costs for power providers are the sole drivers of the price rise.
What is the role of embedded networks in Australia?
The wholesale cost of power is extremely volatile in Australia, which is why DMOs are published every year.
Then, of course, there’s competition. Different retailers offer discount deals, that are all benchmarked against the DMO for easy comparison.
Residential plans can change, even when the DMO doesn’t. The only rule is that retailers cannot charge more than the DMO – it is the upper limit for all providers.
Embedded network operators, on the other hand, can secure contracts locking in prices for as long as five years.
Long term certainty means their customers are less exposed to the volatility of the open market, with increases often in the order of inflation.
In New South Wales, where the DMO is increasing by at least 8.5%, customers in embedded networks may only face a price rise in line with inflation (around 2.4%).
Half a million Australians have their power provided through an embedded network.
Queensland has the most with 187,000.
How much can residents save in an embedded network?
The AER has recently undertaken comprehensive analysis of pricing in embedded networks.
It found the average discount to customers is 14%.
We’ve seen the results at Portia, Brighton on Broadwater - a tower of 216 luxury apartments on the Gold Coast.
Since introducing an embedded network in 2021, unit owners have saved a combined $360,000 in energy costs.
That averages out at $2,500 for each apartment.
This is why embedded networks are not only here to stay but are becoming increasingly popular across the country.
Humenergy provides lower cost, more transparent energy solutions for Residential and Commercial Strata Communities. We work with Property Developers and Body Corporates to create win-win energy solutions that benefit developers, owners, and residents alike.
Humenergy purchases the gas in bulk and on-sell hot water to the residents at low energy rates, additionally Hum can supply and install best in class remote sub-metering systems.
If you wish to look into our solutions for Bulk Hot Water and sub-metering, get in touch with the Hum team today.