Overview

The Essential Services Commission wants your views on how the 2021 price determination of the Victorian default offer should take into account changes to network tariffs, which will apply from 1 July 2021, until 25 May 2021.

The Essential Services Commission is responsible for setting Victorian default offer prices. The default offers are designed to be simple, trusted and reasonably priced electricity options to safeguard customers unable or unwilling to engage in the market.

On 27 November 2020, we made a final decision and price determination on Victorian default offer prices to apply from 1 January 2021 for customers on electricity standing offers.

Consultation closed on 25 May 2021.

Our consultation paper

Our consultation paper seeks feedback on two issues:

  • how we determine the next Victorian default offer to apply from 1 January 2022
  • how the current price determination for Victorian default offer prices should take into account changes to network tariffs applying from 1 July 2021.

We are covering both issues in our consultation paper because how we reflect the changes to network tariffs in our price setting may affect our methods in determining future pricing. Despite being outlined in the same paper, each issue has its own Engage Victoria consultation page. For information about our proposed approach for setting the 2022 Victorian default offer prices, please visit our 2022 Victorian default offer Engage Victoria page.

Please note, our consultation timelines are indicative and subject to the release date of the Australian Energy Regulator’s decision on network prices for 2021–22.

Variation to 2021 Victorian Default Offer

We propose to vary the current Victorian Default Offer price determination to:

  • Update the flat Victorian Default Offer tariff to reflect the new Australian Energy Regulator's approved rates for flat network tariffs. The structure of the flat Victorian Default Offer tariff, and all other cost components (that is, but for network costs) would remain unchanged. This is consistent with the treatment of network costs as a pass through in our Victorian Default Offer methodology.
  • Introduce a new two period time of use Victorian Default Offer tariff, which is calculated based on the new default time of use network tariff structure and prices approved by the Australian Energy Regulator. All other Victorian Default Offer cost components (except for network costs) would adopt the values used to calculate the flat Victorian Default Offer tariff in the current Victorian Default Offer price determination.
  • Update the compliant maximum annual bill to reflect the new common time of use network tariff approved by the Australian Energy Regulator. Currently the compliant maximum annual bill is calculated based on the flat tariff Victorian Default Offer rates.

The introduction of a new two period time of use Victorian Default Offer to align with the new default time of use network tariffs should see more standing offer customers regulated through specified Victorian Default Offer tariffs, rather than through the compliant maximum annual bill. Generally, stakeholders in our past consultation processes preferred specified tariffs as they are more transparent and reduce compliance costs for retailers (compared to the complaint maximum annual bill). Accordingly, we consider our approach will simplify the Victorian Default Offer consistent with objectives under the pricing order.

We are proposing that the variation takes effect from 1 August 2021.

In our current Victorian Default Offer price determination, the we used the tariffs approved by the Australian Energy Regulator for the period 1 January to 30 June 2021. These were published on 16 November 2020. The approved network tariffs for the second half of 2021 were not available at that time.

The Australian Energy Regulator recently made its final decision on the Victorian distribution network businesses’ revenue requirements for the 2021–26 regulatory period. Following this, the Australian Energy Regulator will approve the network tariffs for 2021–2022 in mid-June 2021.

We nominated the Australian Energy Regulator’s final decision on network tariffs as one of the circumstances under which we might vary Victorian Default Offer prices.

Under the current Victorian Default Offer methodology, network costs are treated as a pass through given retailers have no control over the network costs they pay.

2021 Victorian Default Offer

  1. The average annual bill for Victorian default offer customers will fall by ten per cent for residential customers and 14 per cent for small business customers in 2021. This is mainly due to forecast decreases in wholesale electricity and network costs.
  2. We used generally the same approach and methodology we used in our determination on the 2020 Victorian default offer. However, we have accounted for the effect of the coronavirus pandemic on retailers’ costs by increasing our allowance for bad debts.
  3. Our determination is for a 12-month regulatory period starting 1 January 2021. However, when the Australian Energy Regulator approves network tariffs for the second half of 2021, we will consider how best to reflect network tariffs in Victorian default offer prices. If there are material changes to the structure of tariffs we will consult further with stakeholders.

Engaging with stakeholders during the coronavirus pandemic meant we adapted our approach to the needs of stakeholders. We made it easier for stakeholders to have their say in this environment. Activities we undertook included:

  • asking key questions about our approach in our consultation paper
  • promoting discussion in our online public forums where we heard from consumers and businesses
  • answering questions that came to us through our Engage Victoria virtual public forum and
  • requesting and receiving submissions on our consultation paper and our draft decision.

Feedback on our draft decision led to changes in our final decision. Further detail on our responses to submissions can be found in our final decision document and our public engagement report - both documents are available on this page.

We considered all feedback from stakeholders in making our determination, balancing this with the relevant provisions and matters we must have regard to under the Essential Services Commission Act 2001, Electricity Industry Act 2000 and the pricing order.

How to participate

We are seeking feedback from stakeholders on how we can best meet the objectives of the Victorian Default Offer.

How to give us feedback:

  1. Provide comments via our feedback form.
  2. Upload a submission document via our feedback form.
  3. Attend our public forum on 20 May 2021.

Consultation has now closed.


Collection notice

As part of making a submission, we need you to provide personal information, such as your name, email address, town of residence and postcode. We may use this information to send you updates about this review. We may also collect personal information when you contact us with a query. Aside from any exceptions in relevant privacy legislation, we will not use or disclose the information you provide for any purpose other than to progress and respond to your query. You have the right to access personal information we hold about you. We may ask you to pay a small fee for this. You can also request that we correct your personal information in our records at no charge by contacting communication@esc.vic.gov.au.

We will publish your submission

Unless you tell us otherwise we will publish your submission the on the Essential Services Commission website. This process may involve publishing your personal information (your name, not your address). We generally do not accept anonymous submissions. If you have concerns about your identity being made public, please consider making your submission confidential rather than submitting it anonymously.

Requesting confidentiality

If you believe your submission contains information that should be confidential or commercially sensitive you must let us know why in writing. If we agree the information is confidential or commercially sensitive you will need to provide us two copies – one complete and one redacted version (preserving page numbers etc by not simply deleting information). If you make your submission public (e.g. by giving it to the media) we will assume confidentiality no longer applies and publish the unredacted version.

Read more information about our submissions policy.


About us

The Essential Services Commission is an independent regulator that promotes the long-term interests of Victorian consumers with respect to the price, quality and reliability of essential services. We regulate Victoria’s energy, water and transport sectors, and administer the local government Fair Go Rates system.