Don’t default to the default when it comes to energy plans

Default energy plans won’t actually reduce bills for most customers.

Default energy plans won’t actually reduce bills for most customers. Photo: Getty

There has been a lot of talk lately about proposed default energy offers, but will they actually make your bills cheaper?

Well, firstly, they aren’t available just yet and details are still being finalised before their expected July 1 introduction.

But even assuming they do roll out as planned later this year, they won’t actually reduce bills for most customers.

Rather than waiting until the introduction of the energy regulator’s new default offers, the best way for customers to find better value on their energy (either now or post July) is to shop around and compare available discounts.

Default offers – what is all the fuss about?

If rolled out, from July 1 new default energy offers will be introduced in New South Wales, Queensland, South Australia and Victoria.

It could see customers on higher-priced standing offers have their energy bills slashed by hundreds of dollars a year.

According to the AER, the Default Market Offer (DMO) is estimated to reduce bills for customers on standing offers by $122 to $174 in New South Wales, $115 in south-east Queensland and $169 in South Australia.

Victoria will have its own VDO (Victorian Default Offer), which is estimated to save Victorian residential customers between $390 and $520 a year.

The default offers will be designed to protect the most vulnerable customers who don’t want or can’t shop around to get a better deal on their energy.

Particularly vulnerable are older customers who may not feel comfortable comparing online or customers for whom English is not their first language.

Good news, definitely, but even if the new default prices are introduced, standing offers will still generally be much higher than the best available market offers.

What kind of energy plan am I on?

There are two main types of energy plans – standing offers and market offers.

Market offers are what you see advertised on TV and are generally the retailer’s best available plans.

They often include generous introductory discounts or discounts for paying on time. It’s important to understand that market retail offers can be conditional (for example, many require you to pay on time to receive the discounted rate).

Market offers generally expire after a year or two, after which time you will most likely be automatically rolled onto a higher-priced standing offer.

Retailers are now required to notify you when your current energy discount expires and this should be your prompt to shop around.

Standing offers are generally more expensive than market retail plans.

Earlier this year, many retailers introduced automatic discounts of 10 to 15 per cent to standing offers. But even with the discount, most standing offers are generally higher than the retailer’s best market rate.

It varies by state, but it’s estimated that around 10 per cent of energy customers are still on a standing offer.

If you haven’t switched your energy provider or plan for some years, then you are most likely currently on a standing offer.

How do I get a better deal?

Customers who stay on the same energy plan well after their discount period expires can end up paying a ‘loyalty tax’, which could work out to hundreds of dollars a year or more.

Unfortunately, most energy retailers put a lot more effort into attracting new customers than they do rewarding the loyalty of their existing customers.

If you have been on the same energy plan for a couple of years or more, then chances are you are already paying too much.

While you could see your bill reduce slightly through a default offer from July 1, you’ll most likely save more by switching now to a discounted market offer.

Now is the time to take advantage of increased energy competition and find a better deal.

Many energy retailers also offer you a better deal if you pay on time, manage your bills online or pay by direct debit.

And you can also opt to pay your bills fortnightly or monthly to avoid the dreaded bill shock that comes with a large quarterly bill.

But if the thought of shopping around makes you want to turn out the lights and curl into a ball, then give iSelect a call.

Our energy experts can compare your current plan against other options to find you better value.

It can take as little as 15 minutes and iSelect can take care of the whole process in one simple phone call – just make sure you have a copy of your latest bill handy.

Time well spent if you end up saving a few hundred dollars in the process.

DISCLAIMER: iSelect does not compare all energy providers or plans in the market. The availability of plans will change from time to time. Not all plans available from our partners are compared by iSelect and due to commercial arrangements or service availability, not all products compared by iSelect will be available to all customers. Some plans are available only from our call centre and others are available only from our website. Energy plans are available only for properties located in eligible areas of Victoria, New South Wales, south-east Queensland, South Australia and ACT. Visit to view our range of providers.

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