2023-24 VDO Victoria’s electricity prices soar

Victoria’s Essential Service Commission (ESC) has released its final determination for the 2023–24 VDO (Victorian Default Offer) electricity prices today. The 2023–24 VDO is set to soar with an annual increase of around 25 per cent. For residential customers, that’s an extra $352 p.a. (if 4,000 kWh usage), and $752 for small business customers (if 10,000 kWh usage). So what does this really mean?

Why the VDO matters

The Victorian Default Offer is designed to assist consumers who don’t want to or cannot engage in the market. So the Essential Services Commission, Victoria’s energy regulator sets a safety net price. Around 400,000 Victorian residential customers and 55,000 small businesses are currently on the Victorian Default Offer. This represents about 15 per cent of households and 19 per cent of small businesses. The VDO is also the benchmark by which the discount rates for market electricity offers must be expressed.

Most Victorian energy customers are on market offers. But the VDO price is a reasonable indicator of what’s generally happening with energy prices. That’s because the 2023-24 VDO factors in all the things that make up power prices, including wholesale electricity futures market costs, network costs, environmental costs, retail costs and operating margin etc. Market offers are subject to the same pressures, so the VDO is a red flag that electricity costs are set to rise.

2023-24 VDO – here’s the damage

From 1st July 2023, residential customers on the VDO plans will see a 22% to 27% price increase, depending on their region, if their household uses the benchmark 4000kWh of power a year. Of course, the Federal and State Governments announced an Energy Bill Relief program starting 1st July 2023. This will assist vulnerable households and small businesses in mitigating some of the increasing costs – because retailers will apply this rebate directly to reduce bills. Head here for details.