The default market offer trap: Your energy provider’s expensive little secret

The energy industry has a dirty little secret.

After luring you in with a discounted offer for a contracted term, your energy provider could automatically switch you on to a more expensive default market offer (DMO).

That’s part of the reason why so many Australians are paying inflated energy rates.

But you don’t have to cop it any longer.

Compare energy providers at least every 12 to 24 months to find the best deal available and avoid falling into the DMO trap.

Why are Australian energy bills so high?

Are you sick and tired of sky-high energy bills? You should be.

Australians pay among the highest energy rates in the world, with energy prices in Victoria and New South Wales hitting an all-time high in 2019.

Queensland, South Australia and Tasmania are also being hit hard. All three states recorded their second highest energy prices on record in 2019.

That’s despite the Australian Energy Market Commission predicting the average household energy bill should fall by $97 between now and 2022.

But that’s only part of the story. If you haven’t switched energy deals within the past year or two, you might be on an expensive standing offer.

This often happens when you sign up to a discounted energy deal, known within the industry as a market offer.

When the contract expires on your market offer, your energy provider can automatically move you on to a more expensive standing offer.

It’s the energy industry’s expensive little secret. They lure you in with discounted rates, then quietly hike up electricity prices when their introductory offer expires.

It’s important to regularly shop around for the best market offer available. Photo: Getty

What is the default market offer and is it good for you?

This has become such a problem that the Australian government stepped in. The government introduced a Default Market Offer (DMO) from July 1, 2019 that limits the rates energy retailers can charge on standing offers.

That means the Australian Energy Regulator now sets the maximum price energy providers can charge a customer on a standing offer. It’s a move that, according to the Australian Financial Review, may save households up to $218 and small businesses up to $937.

However, being stuck on a DMO may not be the best option for budget-conscious households and small businesses. Remember, the DMO only caps the maximum rates energy provides can charge.

Why it pays to compare energy plans

You should never be paying an energy provider’s maximum rate, whether you’re on a DMO or not.

Energy providers are hungry for your business, and they compete against each other to draw you in with the best market offer.

Most market offers run for between 12 and 24 months. So if you haven’t changed energy deals within the past year or two, you may have already been moved onto an expensive DMO.

That’s why it’s so important to regularly shop around for the best market offer available.

Record when your current market offer expires and compare energy suppliers to find a new market offer before your existing provider automatically moves you on to a move expensive DMO.

You have the power here.

Online comparison service ElectricityandGas.com.au empowers Australian consumers to compare name brand electricity and gas providers to find the best available market offer.

Don’t fall for the energy industry’s dirty little secret. Compare energy providers every 12 to 24 months to avoid the DMO trap and stop paying the maximum electricity and gas rates.

This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.