TLDR
Australia's energy regulator has lowered the default electricity price cap for standing-offer customers in New South Wales, South East Queensland and South Australia from 1 July 2026. The steepest cut lands on South East Queensland small businesses, down $445 to $3,849 a year. A NSW household switching to a competitive market offer can save around $400 annually.
KEY TAKEAWAYS
A ceiling, not a bargain
The Default Market Offer is the number most electricity customers have never heard of, even though it directly sets the ceiling on what they pay. The DMO is a safety-net price rather than the cheapest plan available, and it acts as a reference price to help consumers compare market offers.[1] Customers who have never actively chosen a market contract, and there are hundreds of thousands of them, sit on standing offers that retailers cannot legally push above this cap.
From 1 July 2026, the Australian Energy Regulator has lowered that ceiling. The final determination covers three distribution regions: New South Wales, South East Queensland and South Australia.[2] No other state sits under the DMO framework.
AER Chair Clare Savage put it plainly: "The Default Market Offer may not be the cheapest electricity plan available, but it provides a fair and reasonable option for someone who hasn't or doesn't want to engage in the market."[3] Savage is not claiming victory on affordability. The regulator is claiming the floor held.
The 2026-27 figures
Residential flat-rate standing offers in the Ausgrid distribution region, which covers most of Sydney and the Hunter Valley, are capped at $1,899 per year for a typical 3,900 kWh household, down $66 or 3.4 per cent from 2025-26.[2] It is a modest reduction, but it moves in the right direction for the first time in several years.
The largest cut in the determination falls on small businesses in South East Queensland. Small business flat-rate standing offers in the Energex distribution region are capped at $3,849 per year for 10,000 kWh of annual consumption, a reduction of $445 or 10.4 per cent.[2] Any business that has stayed on a default plan through recent years of energy price spikes will see that drop apply immediately when the new cap takes effect.
The AER's determination sets separate caps for the daily supply charge and the usage charge under both flat-rate and time-of-use tariffs.[1] High-usage customers should check both components: the supply charge is fixed per day regardless of how much power is drawn, while the usage charge scales with consumption.
The switching gap
Cutting the cap is one thing. Getting customers off the cap is another. The gap between a standing-offer price and the best available market offer remains wide, and it is worth real money.
The NSW Independent Pricing and Regulatory Tribunal found that a typical New South Wales customer could save around $400 a year by switching from a standing-offer plan to a competitive market offer.[4] The Australian Competition and Consumer Commission put the national range at between $100 and $250 per year depending on region, though those figures were drawn from a period of higher standing-offer prices.[5]
Clare Savage said the regulator's intent was to keep the DMO a genuine safety net: "We've worked to ensure consumers have access to a trusted, fair, and reasonably priced Default Market Offer that, come 1 July, is locked in for the next 12 months, providing consumers who can't or won't shop around that important safety net."[3] Once the final determination takes effect, retailers in the three covered regions cannot raise standing-offer prices above the cap for the full year.
The policy design does not compel anyone to shop around. Customers who do nothing will receive the lower cap automatically if they are currently on a standing offer. Those who actively compare and switch will, on the research evidence, do considerably better still.
Why prices differ so much between states
A standing-offer customer in South Australia pays a materially different annual bill from one in New South Wales, even accounting for different consumption patterns. The gap is structural, not arbitrary.
Regional variations in DMO prices reflect differences in network costs, which make up between 39 and 54 per cent of the cap depending on region, as well as wholesale costs at 30 to 41 per cent, and environmental scheme costs at 2 to 3 per cent across the three jurisdictions.[2] Network costs cover the poles, wires and meters that deliver electricity to homes and businesses, and are set by separate regulatory processes that differ sharply between states based on the age and density of local infrastructure.
South Australia's network is older and serves a more dispersed population than Ausgrid's Sydney-centred footprint, pushing the per-kilowatt-hour cost of delivery higher before a retailer adds a cent of margin. Wholesale electricity costs, driven by the generation mix and spot-market dynamics in each region of the National Electricity Market, add a further layer of variation. Environmental scheme costs are relatively flat across the three regions and contribute little to the price gap.
What high-usage customers should check now
The AER's determination sets out the maximum daily supply charge and the maximum per-kilowatt-hour usage charge for each distribution region and tariff type.[1] Comparing those two numbers against the equivalent lines on a current bill takes less than five minutes and immediately shows whether a retailer is charging at, near or well below the cap.
For a South East Queensland small business drawing 10,000 kWh a year, the new $3,849 annual cap represents a meaningful cost reduction on paper. In practice, that saving only materialises if the business is actually on a standing offer. The ACCC has consistently said the comparison market for small business electricity is underutilised and that switching rates remain lower than they could be.[5]
The practical step is the same for residential and business customers: check the bill type, compare the applicable DMO cap rates published by the AER, and use the federal government's Energy Made Easy comparison tool to see what competitive offers are available in the relevant distribution region. The new cap takes effect on 1 July 2026.
SOURCES & CITATIONS
FREQUENTLY ASKED QUESTIONS
What is the Default Market Offer and who does it apply to?
How much will NSW residential customers pay under the new cap?
What is the biggest price cut in the 2026-27 determination?
Can I save more by switching off a standing offer?
Why do electricity prices differ between NSW, Queensland and South Australia?
Samuel Abiola writes about inequality and social policy. He works close to the research and is interested in what the numbers mean for the people counted in them.
