Joint Submission to the Victorian Default Offer Review 2025-26 Draft Decision

Joint Submission to the VDO Review 2025-26 Draft Decision

This is a joint submission made by the Victorian Council of Social Service (VCOSS), Brotherhood of St. Laurence, Consumer Action Law Centre, Council on the Ageing Victoria, Energy Consumers Australia, Financial Counselling Victoria, and Uniting. This group brings a deep knowledge of people’s experiences navigating the Victorian electricity market and the impacts of energy hardship and poverty. Collectively, we work towards a Victoria free from all forms of hardship, where everybody can experience genuine wellbeing. 

The Victorian Default Offer (VDO) is a crucial safeguard for consumers who face structural barriers to engaging with the electricity retail market. We strongly support the VDO’s continuing role in the Victorian energy market, and the Essential Services Commission’s (ESC) role in regularly reviewing and renewing the VDO. 

Consumer advocates are pleased to see that the ESC’s draft decision on the VDO for 2025-26 keeps electricity costs stable, on average. However, it does represent around 1 per cent average rise across the distribution zones during a cost-of-living crisis.  

While this is a better outcome for Victorian consumers when compared to other jurisdictions, where the Default Market Offer draft price increased between 2.5 per cent and 8.9 per cent, we do stress that consumers are still dealing with very high prices. Electricity prices have been increasing over time since the establishment of the VDO, and especially with the 2023-24 VDO which increased prices 25 per cent. We also note that while the average cost in the 2025-26 draft price is stable, in CitiPower’s distribution zone, consumers will face a rise of up to 5 per cent under the draft decision. 

On a positive note, we acknowledge that the ESC has adjusted the methodology for wholesale load profiles to exclude solar exports. We support this decision. This is in line with the VDO’s role as a consumption price, and the ESC’s remit to set an efficient cost stack. This decision helps contain rises to the VDO price. 

This submission is made at a time when high costs for essential services like electricity are causing severe financial hardship in Victorian communities. For many people supported by the community sector, incomes are simply not sufficient to cover expensive energy as well as the costs of other essentials, especially if they are living in poor quality housing that is difficult to heat and cool.  

The ongoing impact of high energy costs is that tens of thousands of Victorians are in energy debt. Social services report that community demand for assistance is at unprecedented highs. Meanwhile, large energy businesses make record profits. 

In this context, we encourage the ESC to consider the costs of pricing decisions holistically, and to centre the consumer in decisions, rather than businesses. This is especially important for vulnerable and low-income households, for whom costs and benefits are a required consideration for the ESC, under the Commission’s statutory obligations. 

We also urge the ESC to undertake deeper analysis of retail behaviours and seek more granular detail of operational costs and, where possible, make that information public. This would provide for greater scrutiny on retailer behaviour and help to address the information asymmetry experienced by consumer advocates representing Victorian households in processes such as the VDO review. 

Finally, we note that, although the VDO works as a crucial regulatory safeguard, it is ultimately a price calculated on the costs of an unfair and unaffordable market. As such, consumer advocates urge regulators and policymakers to investigate complementary measures above and beyond the VDO, such as a targeted social tariff, to deliver electricity to low-income households at a truly affordable rate. 

This submission includes case studies detailing the lived experience of electricity consumers who have been supported by community sector organisations. The names of individuals have been changed.