Implementing the Victorian Default Offer
The Victorian Government has implemented the Victorian Default Offer in response to the Independent and Bipartisan Review of the Electricity and Gas Retail Markets in Victoria.
The Victorian Default Offer is a fair price for electricity that will replace costly standing offers. All Victorian electricity retailers will be required to offer to households and small businesses from 1 July 2019. Customers on flat tariff standing offers were automatically transferred to the Victorian Default Offer on 1 July 2019.
- Orders published in the Government Gazette
- VDO Orders Explanatory Statement (PDF, 453.8 KB)
- VDO Orders Explanatory Statement (DOCX, 1.6 MB)
- ESC Final Advice Victorian Default Offer to apply from 1 July 2019 (PDF, 1.7 MB)
- ESC Final Advice Victorian Default Offer to apply from 1 July 2019 (DOCX, 1.2 MB)
- ESC Final Advice Corrigendum Victorian Default Offer to apply from 1 July 2019
These Orders are:
- an Order in Council, regulating tariffs for the sale of electricity to prescribed customers, made under section 13 of the Electricity Industry Act 2000 (EIA);
- a Ministerial Order, varying the period for retailers to vary their standing offer tariffs, made under section 35(3B) of the EIA; and
- an Order in Council, made under section 17 of the EIA, amending the transitional pricing rule for exempt sellers under the General Exemption Order.
The explanatory statement outlines the key aspects of these Orders. The Essential Services Commission’s final advice details the methodology utilised in its advice to Government on the VDO price to apply from 1 July 2019.
On 31 May 2019 the Essential Services Commission issued a correction relating to the calculation of the VDO controlled load tariffs for Jemena and Powercor distribution zones. A further Order in Council has been made to correct the relevant tariffs in the Order under section 13 of the Electricity Industry Act 2000.
- Letter to Minister regarding VDO tariffs controlled load
(PDF, 276.4 KB)
- Orders published in Government Gazette 4 June 2019
Initial market outcomes since the introduction of the Victorian Default Offer
Following the introduction of the VDO on 1 July 2019, the Minister for Environment, Energy and Climate Change engaged an independent expert panel to monitor the early impacts of the VDO on the retail market.
This report sets out observations on initial changes to Victoria’s retail electricity market over the period 1 July to mid-October 2019, based on publicly available information.
The key message of the independent panel’s report is that while it is too early to reach definitive conclusions as to whether the VDO is achieving the government’s policy objectives, the early signs are encouraging.
- despite industry concerns that the VDO would become a ‘floor’ price, this has not occurred
- active customers are still able to benefit from a (narrower) range of lower priced offers
- there has been a trend away from conditional discounting
- fears that the VDO would be set so low as to force a number of retailers to exit the market, threatening ongoing competition, have also waned - indeed there is evidence that new retailers remain interested in entering the market
- there are early signs that, relative to the Default Market Offer, the VDO may be exerting greater downward pressure on prices paid by all customers, not just those on standing offers
- a number of customers are saving as a result of the introduction of the VDO.
Draft Orders Consultation
The Department of Environment, Land, Water and Planning (DELWP) sought stakeholder views on draft Orders to implement the Victorian Default Offer (VDO).
- Victorian Default Offer - Draft Orders Consultation paper (PDF, 489.4 KB)
- Victorian Default Offer - Draft Orders Consultation paper (DOCX, 1.6 MB)
- Appendix A Draft section 13 Order (DOCX, 45.9 KB)
- Appendix B Draft section 35(3B) (DOCX, 17.1 KB)
These Orders are:
- a draft Order in Council, regulating tariffs for the sale of electricity to prescribed customers, to be made under section 13 of the Electricity Industry Act 2000 (EIA) (the section 13 Order) at Appendix A; and
- a draft Ministerial Order, varying the period for retailers to vary their standing offer tariffs, to be made under section 35(3B) of the EIA (the s 35(3B) Order) at Appendix B.
Prior to recommending the making of the section 13 Order, the Minister for Energy, Environment and Climate Change (the Minister) was required, under section 13(1C) of the EIA, to consult with the Premier and Treasurer.
The consultation paper outlined DELWP’s proposals for the key aspects of the section 13 Order and provided some questions to guide feedback.
Submissions received to the DELWP draft Orders Consultation Paper
Final Government Response
The final response supports 11 recommendations to encourage energy markets to be simpler and fairer allowing all Victorians access to affordable energy.
|Recommendation 1||Delivering lower prices|
|Recommendation 2||Abolish the requirement for retailers to offer standing offer contracts|
|Recommendation 3||Empowering consumers|
|Recommendation 4||Ensuring contracts are clear and fair|
|Recommendation 5||Unlocking the benefits of data|
|Recommendation 6 & 7||Supporting vulnerable consumers|
|Recommendation 8||Strong market supervision|
|Recommendation 9||Consumer-focused retail rules|
|Recommendation 10||Energy and water ombudsman Victoria|
|Recommendation 11||Energy market structure|
Learn more about the independent and bipartisan review process
The interim response announced the immediate steps the Government is taking on key Review recommendations. This includes further analysis of recommendations 1 and 2 on the application and scope of the regulated ‘Basic Service Offer’ and revocation of standing offer contracts, and support of recommendations 3 to 11.
This recognises immediate measures adopted by Victoria’s three largest electricity retailers, AGL, EnergyAustralia and Origin Energy, to reduce electricity costs in 2018 for more than 285,000 Victorian residential customers on standing offer contracts.
The Government has also already progressed a number of the review’s 11 recommendations in full or in part. For example, work has begun to promote consumer awareness of the competitive market and the Government’s price comparator website Victorian Energy Compare. The Government has also committed to rolling out the Home Energy Brokerage Service and the Home Energy Assist program, funding more than 3,300 Victorian homes to become more energy efficient.
The Government acknowledges further analysis on the remaining recommendations and their implementation is required. Consultation with stakeholders will help inform the Government’s final response, which is anticipated to be delivered in mid-2018.
DELWP released a Consultation Paper (PDF, 392.2 KB), (DOCX, 145.6 KB) to accompany the interim response. The purpose of the consultation paper was to seek stakeholder feedback on the specific review recommendations relating to:
- the introduction of a Basic Service Offer (Recommendation 1) and abolition of standing offers (Recommendation 2); and
- market contract periods, practices and variations (Recommendation 4).
DELWP also welcomed feedback on other review recommendations.
DELWP received 26 submissions to the Consultation Paper. Submissions were generally treated as public documents and published to this website, unless the author asked that all or part of their submission be treated as confidential. The submissions will help inform the Government’s final response to the Review.
- 1st Energy
- Alinta Energy
- AMP Capital
- Brotherhood of St Laurence, Consumer Action Law Centre, Council on the Ageing, Financial and Consumer Rights Council, Jesuit Social Services
- Clean Energy Council
- Consumer Action Law Centre
- Consumer Policy Research Centre
- DC Power Co
- Environment Victoria
- ERM Business Energy
- Momentum Energy
- Next Business Energy
- Northern Alliance for Greenhouse Action
- Onsite Energy Solutions
- Powershop / Meridian
- Reposit Power
- Simply Energy
- St Vincent de Paul Society
- Victorian Council of Social Service
In November 2016, the Victorian Government announced an independent bipartisan review of Victoria's electricity and gas retail markets, to examine the operation of the Victorian electricity and gas retail markets and provide options to improve outcomes for consumers.
The Independent Review panel’s final report (PDF, 2.6 MB) was handed down to the Minister on Sunday 13 August 2017. The findings of the independent panel highlight that Victorian consumers are not gaining the benefits of a competitive retail market. The review recommended a suite of reforms and initiatives, with 29 recommendations in total to place the consumers back on a level playing field.
Review of electricity and gas retail markets in Victoria
The independent review panel consisted of John Thwaites, who served as Deputy Premier of Victoria from 1999 to 2007, Terry Mulder who served as Minister for Public Transport and Roads from 2010 to 2014, and Patricia Faulkner AO, former Secretary of the Victorian Department of Human Services and Director of Consumer Affairs.
- Terms of Reference for the review (PDF, 176.7 KB)
- Terms of Reference for the review (Accessible) (DOCX, 126.3 KB)
The review panel released a discussion paper on some of the key issues and questions concerning the operation of Victoria's electricity and gas retail markets.
- Discussion Paper - Review of Electricity and Gas Retail Markets in Victoria (PDF, 467.6 KB)
- Discussion Paper - Review of Electricity and Gas Retail Markets in Victoria (Accessible) (DOCX, 311.9 KB)
24 formal submissions were received to the Discussion Paper. Below is the complete list of submissions received by the secretariat. Submitters have agreed that they are entitled to deal with the intellectual property rights (including copyright) of all material (including any third parties) in their comments and have obtained the necessary consent(s) from any and all third parties owning the copyright for such dealings.
- AGL (PDF, 2.8 MB), (DOCX, 191.5 KB)
- Alan Pears, Senior Industry Fellow, RMIT University (PDF, 1.0 MB), (DOCX, 91.3 KB)
- Alinta (PDF, 521.3 KB), (DOCX, 641.5 KB)
- Anne Kallies, RMIT University (DOCX, 21.2 KB)
- Alternative Technology Association (PDF, 258.8 KB), (DOCX, 159.7 KB)
- Australian Dairy Farmers (DOCX, 348.8 KB)
- Australian Energy Council (PDF, 655.0 KB), (DOCX, 377.5 KB)
- Australian Gas Networks (PDF, 206.2 KB)
- Brotherhood of St Laurence (PDF, 1.2 MB)
- Community Information & Support Victoria (PDF, 346.0 KB), (DOCX, 66.8 KB)
- Consumer Action Law Centre (PDF, 316.2 KB), (DOCX, 82.2 KB)
- Consumer Policy Research Centre (PDF, 453.3 KB), (DOCX, 124.1 KB)
- Energy and Water Ombudsman (PDF, 1.2 MB), (DOCX, 339.0 KB)
- Energy Australia (PDF, 567.8 KB), (DOCX, 963.0 KB)
- Energy Consumers Australia (PDF, 936.1 KB), (DOCX, 2.7 MB)
- Environment Victoria (PDF, 472.6 KB)
- Jemena, Citipower, Ausnet, United Energy (PDF, 931.8 KB)
- Lumo (PDF, 255.6 KB), (DOCX, 2.6 MB)
- Momentum Energy (PDF, 349.3 KB)
- Origin (PDF, 362.8 KB), (DOCX, 144.0 KB)
- Powershop (PDF, 131.2 KB), (DOCX, 177.6 KB)
- Ron Ben-David (PDF, 2.4 MB)
- Queensland Consumers Association (DOCX, 48.3 KB)
- Victorian Council of Social Service (PDF, 927.7 KB), (DOCX, 3.5 MB)
The review commissioned the following reports as part of the investigation into the retail energy market.
Carbon Market Economics
Commonwealth Scientific and Industrial Research Organisation (CSIRO)
Page last updated: 25/11/19