The Essential Services Commission (ESC) has released its draft decision on the 2025–26 Victorian Default Offer (VDO), which sets maximum electricity prices for domestic and small business customers on standing offers in Victoria. The VDO acts as both a safeguard and a comparable price for market offers.


Key Highlights

  • Minimal Price Changes:
    • Domestic customers on a flat tariff will see an average increase of $12 (less than 1%).
    • Small business customers on a flat tariff will see an average increase of $103 (3%).
    • Bill changes vary by distribution zone, with some areas seeing slight decreases.

  • Key Cost Drivers:
    • Network costs (40% of the total VDO cost stack) increased by 7% on average, driving most of the price change.
    • Wholesale electricity costs for residential customers decreased by 4%, reflecting a change in how customer load profiles are calculated.
    • Environmental costs fell by 9%, due to lower liabilities under government energy programs.
    • The retail operating margin was reduced from 5.3% to 5% to balance retailer profitability with cost-of-living concerns.

Table 1: Change in average annual Victorian Default Offer bills for domestic customers on
flat tariff (nominal assuming 4,000 kWh/year)


Table 2: Change in average annual Victorian Default Offer bills for small business customers on
flat tariff (nominal assuming 10,000 kWh/year)

Methodological Changes

  • New approach to wholesale cost estimation: The ESC will now use import-only load profiles instead of net load profiles (which included solar exports). This aligns with the Australian Energy Regulator's methodology and is expected to provide a more accurate representation of retailers’ costs.
  • Hedging strategy adjustments: The calculation of wholesale electricity costs continues to rely on ASX Energy futures contracts, but updates in load profile methodology will impact hedging cost estimates.

Next Steps

  • Public consultation: Submissions are open until 11 April 2025 via the Engage Victoria website.
  • Final decision: Expected by 24 May 2025, incorporating updated network tariffs and final wholesale price inputs.