The reference price is one of the most useful consumer tools in Australian energy — but most people have no idea what it is or how to use it. Understanding it could save you hundreds of dollars per year.
What is the electricity reference price?
The reference price is a government-set benchmark for electricity costs. It was introduced to give consumers a standard way to compare energy plans and ensure retailers compete fairly. Think of it as the "sticker price" — the price that shouldn't be exceeded for basic residential customers, and which competitive plans are meant to beat.
Two versions exist:
- Default Market Offer (DMO): Applies in NSW, SA and south-east QLD, set by the Australian Energy Regulator (AER).
- Victorian Default Offer (VDO): Applies in Victoria, set by the Essential Services Commission of Victoria (ESCV).
DMO vs VDO: what's the difference?
While both serve as reference prices, they're calculated differently. The DMO is designed as a maximum price for customers who don't choose a plan, while the VDO is designed as a "fair price" that's reasonable but leaves room for competitive plans to be cheaper.
Key insight: Good market offers should be 15–25% below the reference price. If a plan is marketed as "25% below DMO" — that's meaningful savings. If it's only 5% below, shop more carefully.
Finding the reference price on your electricity bill
Australian energy retailers are required by law to include a reference price comparison on your bill. Look for a section that says something like:
- "Your estimated annual cost: $1,850"
- "Default Market Offer estimated annual cost: $2,100"
- "You are paying 11.9% less than the DMO"
The exact wording varies by retailer. Some display it prominently; others bury it in fine print. If you can't find it, call your retailer — they're legally obligated to provide this information.
Using the reference price to find a better deal
Here's a simple three-step process to use the reference price as a benchmark:
- Find your current plan's position: Note whether you're above, at, or below the reference price and by what percentage.
- Compare with the market: Use a comparison service (like Pick A Deal) to find plans at your address. Look for plans 20%+ below the reference price.
- Calculate actual savings: Multiply your annual usage by the difference in cents per kWh between plans. This gives you a real dollar saving to compare against any switching hassle.
| Your position vs reference price | Action recommended |
|---|---|
| More than 10% above DMO/VDO | Switch immediately — significant savings available |
| At the reference price (0%) | Shop around — you can almost certainly do better |
| 5–15% below reference price | Reasonable, but worth reviewing annually |
| 15–25% below reference price | Good deal — check annually at contract renewal |
Frequently asked questions
What is the Default Market Offer (DMO)?
What is the Victorian Default Offer (VDO)?
Am I currently on the default offer?
How much can I save by switching from the default offer?
How often does the reference price change?
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