The Essential Services Commission initiated stakeholder consultations for the 2025-26 Victorian Default Offer (VDO), released a request for comment paper to refine the regulatory framework. This process will determine electricity prices for domestic and small business customers for the period from 1 July 2025 to 30 June 2026, with a final decision due by 24 May 2025.

Key Focus Areas for Consultation

The Commission sought input on several critical areas, including the potential separation of retail operating costs for domestic and small business customers, aligning with the Australian Energy Regulator's methodology. Additionally, the current retail operating margin of 5.3%—reduced from a historical 5.7%—is under review, with the Commission inviting feedback on its adequacy in light of evolving market dynamics.

Environmental cost components, particularly Victorian Energy Efficiency Certificate (VEEC) pricing, are also being scrutinised. The current method using 12-month trade-weighted averages has drawn commentary, prompting the Commission to explore alternative approaches that better reflect actual retailer costs while maintaining transparency. Furthermore, the treatment of solar exports in wholesale cost calculations is being evaluated, with stakeholders encouraged to weigh in on whether to maintain the current approach or adopt alternatives.

Stakeholder Engagement and Next Steps
A draft decision will follow review of submissions in March 2025, accompanied by a public forum, providing further opportunities for input before the final determination. The Commission emphasises evidence-based proposals that balance regulatory consistency with the VDO’s consumer protection objectives.