The Default Market Offer (DMO) was introduced as a consumer protection tool. This function must be at the centre of any decision the Australian Energy Regulator (AER) makes when calculating the DMO.
The AER includes in its determinations, additional objectives it considers relevant when determining an annual price. These include maintaining incentives for competition, innovation and for consumers to engage in the market and allowing retailers to recover their costs.
Despite this, our view remains that the primary function of the DMO should be as a consumer protection tool.
These additional objectives should be pursued only if they create material benefits for consumers, and they should be clearly discounted compared to the consumer protection benefits.
Read our submission (PDF, 451.89KB)
There are several immediate measures the AER can take to prioritise protecting consumers in its determination:
- Removing the competition allowance permanently,
- Reducing the small business retail margin so it is in line with the residential retail margin,
- Making retail cost data as transparent as possible.
We also reiterate that an evolving energy market is making the roles of the DMO both more significant, but also more complex. Broader reforms may need to be considered to ensure the DMO continues to effectively protect consumers going forward.
