What Are the Pros and Cons of the Victorian Default Offer?

On July 1, 2019, the Victorian government launched a new energy pricing scheme that was designed to make the cost of electricity fairer. It’s called the Victorian Default Offer (VDO) and it may have already had an impact on your energy bills. So, what exactly does this new pricing system involve? And what are the pros and cons of the Victorian Default Offer?

How does the Victorian Default Offer work?

Have you ever heard of the energy ‘loyalty tax’? It’s the increased pricing often applied to customers who don’t shop around for their energy retailer. Those that stick with the same electricity supplier over several years are often subjected to subtle price increases that gradually result in a much higher bill.

The VDO was designed to stop this from happening. It is a capped price (set by the government) which prevents retailers from overcharging customers. As of July, all eligible households with standing offers (the basic energy contract offered by retailers) were automatically transferred over to the Victorian Default Offer capped pricing system.

What are the pros of the Victorian Default Offer?

  • It will prevent unfair price hikes: Because pricing is now capped, energy retailers won’t be able to apply unfair price hikes to their basic energy plans. This means that customers who don’t want to shop around won’t be penalised for staying with the same retailer. As a result, the VDO makes energy pricing fairer for more Victorians.

 

  • The VDO will save more people money: Around 130,000 residential customers were automatically transferred to the VDO, saving an average of $450 on annual electricity bills. The savings are even better for the approximately 30,000 small businesses that were switched over to the VDO, with annual bill reductions of over $2,000.

 

  • The VDO serves as a point of reference: The VDO has been designed to make comparing electricity pricing between retailers easier. Rather than spending hours trying to figure out how the rates on a discounted plan compare to your current retailer, all energy plans will now have to explicitly state how they compare to the VDO (e.g. 4% less, 6% more).

 

What are the cons of the Victorian Default Offer?

  • The VDO isn’t available to everyone: Any customers with embedded networks won’t have access to the VDO. An embedded network is one where the energy contract is directly between the energy retailer and the owner of a property development. This is typically the case in retirement villages, high-rise apartment complexes or caravan parks.

 

  • The VDO is only automatic under certain conditions: The automatic rollover to the VDO only applied to small businesses and households that were on standing offers that used a set tariff rate. Anyone with a time-based tariff plan (those based on peak or off-peak usage) will need to submit a request to their energy supplier if they want to be moved to the VDO.

 

  • The VDO isn’t the cheapest energy deal out there: The VDO offers ‘fair’ rates to those who don’t want to shop around. But it is not the cheapest deal on the market. If you want to find the very best energy deal to suit your needs, then why not try our free online pricing comparison tool.
Author: Bec Wilkinson
Bec Wilkinson is an ElectricityComparison.com.au News Contributor from Melbourne, Australia. Bec is a founding member of the Electricity Comparison news team.