Electricity reference price: What is it and how does it affect your energy bill?

Electricity tower

The term electricity reference price is often mentioned in advertising material for energy companies as they advertise their plans to customers. While providers will compare their own rates to this reference price, what you may be asking is what is it exactly and how does it affect my energy bill. Here are the answers.

What is the electricity reference price?

The electricity reference price is set by the Australian government, and is based on the average electricity usage in your area. When an energy provider is offering a greater percentage off of the reference price, that generally means a cheaper energy plan. 

Who is required to advertise the reference price?

Electricity companies in New South Wales, South Australia and South-East Queensland are required to show you a percentage that indicates how their pricing compares to reference prices across all types of advertisements, so that you have a simple way to compare plans and providers.

Due to different energy usage and distribution costs across Australia, different areas and postcodes feature different reference prices. The price will also differ depending on what type of tariff you choose. 

Electricity reference price: What does it actually mean?

The reference price is a benchmark electricity price set by the government, used to make comparison prices between providers and plans easier for customers. It is also known as the default market offer or DMO, as this is the official term used for the figure set by the AER that is used as the reference price. 

The reference price indicates how much a representative customer would pay on a single-rate tariff on a default price set by the regulator. Providers are then required to advertise their plans in relation to the reference price, so that customers like you can better understand when they are getting a good deal. 

The reference price is also the maximum you can be charged on a standing offer. Market offers can theoretically exceed this price, but usually don’t. 

Market offers vs Standing offers

A standing offer is a type of electricity plan offer that all energy retailers are required to provide. They are generally more expensive than the market offer and usually lack incentives. With a standing offer plan, the government sets the minimum terms and conditions and the price cannot change more than every six months. 

A market offer usually features a more competitive price and the retailer is able to set their own terms and conditions. The price can be changed at any time (depending on your contract) and they usually feature discounts or other incentives.

If you don’t know which type of offer you’re on, check your latest energy bill. Standard offers usually kick in if you’ve moved home, your market offer has expired or if you never signed up to a market offer. It is always a good idea to compare your energy plans at least once a year to make sure you are on the best deal possible for your circumstances and energy use. 

How do I know what the current reference price is?

The reference price is set yearly by the Australian Energy Regulator, and details can be found on their site

Energy providers advertising their own plans will also reference the default market offer, however whether or not they show the actual amount is at their own discretion. Remember, they are required to display their rates as a percentage in relation to the reference price. 

What is a good energy price?

That all depends on what you need for your home. The easiest way to find an energy plan that suits your needs at a good price is by comparing electricity providers and plans in your area. 

Here at Mozo, we make that easy by allowing you to find and compare plans for your location over at our energy hub, or you can use the handy comparison tool below.

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