The Australian Energy Regulator (AER) has released its draft determination for the Default Market Offer (DMO) for electricity prices in 2025–26, known as DMO 7.
The DMO is an electricity price safety net for residential and small business customers on standing offers in New South Wales (NSW), South East Queensland (SEQ) and South Australia (SA). It also acts as a reference price for all other market offers in each region.
Cost increases across nearly all components of the DMO have resulted in draft prices for residential customers increasing between 2.5% and 8.9% compared with the previous DMO, depending on the region. Small business customers could see rises between 4.2% and 8.2%.
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AER chair Clare Savage said, “This is a very difficult time for many communities across northern New South Wales and South East Queensland who have been or remain without power following ex-Tropical Cyclone Alfred.”
As extreme weather events increase in frequency, the AER has also been providing additional guidance to networks that are working to increase resilience, including their ability to withstand and recover from these events.
“We know that cost-of-living pressures are front of mind for many households and small businesses.
“We’ve seen cost pressures across nearly every component of the DMO, and we have given careful scrutiny to every element of the DMO cost stack to ensure prices are a reasonable reflection of the costs of a retailer to supply electricity,” Savage said.
Wholesale market and network costs—the two largest components of DMO prices—have seen increases of 2% to 12% for the majority of customers.
Average wholesale market spot prices increased across 2024, impacted by factors such as high demand, coal generator and network outages, and low solar and wind output that drove high price events across DMO regions. These high price events have also affected the price of wholesale electricity contracts for 2025–26.
Network costs increased for most customers, with some customer types in SA and SEQ seeing network costs decrease.
Multiple and varying factors have contributed to rising network costs in each region, including inflation and interest rates leading to a higher rate of return.
Retail costs are a smaller component of DMO prices than wholesale and networks costs, but these have also increased due to growing costs reported by retailers.
The AER has considered the current economic environment and not applied a separate competition allowance for retailers in its draft determination.
“While economic conditions have eased somewhat, underlying inflation remains elevated and the Reserve Bank of Australia has noted the economic outlook remains uncertain. The draft DMO prices therefore do not include a competition allowance.
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“Not including the competition allowance will also alleviate a small amount of cost-of-living pressure on consumers,” Savage said.
Savage also noted that retailers’ more competitive market offers have generally reduced in price since the last DMO came into effect on 1 July 2024 and encouraged consumers to seek a better offer with their current or another retailer.
The draft DMO determination is subject to public consultation and stakeholder feedback, along with updated network and wholesale costs, which will be reflected in the final decision. A final decision will be published on 26 May 2025, with changes to apply from 1 July 2025.
