The Essential Services Commission recently increased the electricity rates for the Victorian Default Offer (VDO). While exact prices are dependent on your location, VDO electricity rates went up an average 7.8% on 1 January 2020. This equates to an average annual bill increase of around $110 for households and $465 for small businesses. The increase directly affects 120,000 households and businesses and continues to influence the wider electricity market with some reports of bills rising up to 30%.
Whether you’re on the standing VDO rate or a market offer (you can read more about the difference between each at the end of this article), now is a great time to compare electricity rates to make sure you’re not paying more than you need to for your electricity.
Beat the price rise and save money in 4 simple steps
While the VDO provides a fair default rate, it is rarely the cheapest option. Often you can find a better deal by shopping around and in some cases your existing retailer can even offer you a better deal. Commission chairperson Kate Symons says “I encourage all Victorians to look at their bills to see if they are on the best deal available – you could be saving hundreds of dollars a year.”
You don’t have to accept high electricity rates; you can switch your plan or provider at absolutely no cost with the following 4 steps.
1. Understand the rates you are on
While it might sound simple, keeping yourself informed about current rates is the first step towards savings. You may have received a letter from your electricity provider about your new rates. You can also check rates on a recent bill, or request an energy fact sheet from your retailer. Energy retailers publish a fact sheets for all current energy plans on their website.
Two important details to review are the rate for consumption or usage as well as the daily supply charge rate. It’s also worth checking your bill or the energy fact sheet to see if any discounts and incentives are being applied. If you need help finding the rates on your bill, you can refer to our blog, How to Make Sense of Your Electricity Bill.
2. Scan the market for competitive offers
If you want to compare electricity prices, many market offers are made available on retailer websites. Available rates are dependent on your location, with most websites prompting you to enter your postcode. Relevant offers for your area are then presented, including green power alternatives.
In today’s highly competitive market, you can often save money by bundling your electricity with other utilities such as gas or broadband internet. Look for the most competitive offers based on the needs of your household, but don’t feel pressured to change services if you’re happy with them.
3. Compare rates and calculate your estimated savings
Making sense of electricity market data can be challenging, with different offers, rates, and savings not always easy to interpret. Energy fact sheets make this much simpler. You should download the energy fact sheet for each offer and directly compare it with the energy fact sheet for your current plan. Pay close attention to the sections for “offer rate and details” as well as “estimated electricity cost” which provides an estimate of the annual cost for different sized households.
Alternatively, if you know how much electricity your household uses (you can use the consumption data from your bills), you can do a more accurate calculation of your estimated savings. When comparing rates, don’t forget to include discounts. The following table presents an example calculation of potential savings for a customer living in Richmond, Victoria. The total amount this customer can save per year is $209.64.
Calculation of potential savings
|Your existing rate (after increase & incl. any discounts)||25.17||cents/kWh|
|New rate through a market offer (incl. any discounts)||21.45||cents/kWh|
|Average daily usage (medium sized household, 2-3 people)||11.80||kWh/day|
|Total annual usage||4,307.00||kWh|
|Annual savings for usage charges||$160.22||/ year|
|Your existing rate (after increase & incl. any discounts)||113.09||cents/day|
|New rate through a market offer (incl. any discounts)||99.55||cents/day|
|Annual savings for supply charges||$49.42||/ year|
|Total annual savings||$209.64||/ year|
The calculations are simple. If your existing rate is 25.17 cents/kWh, but you find a new rate of 21.45 cents/kWh, this is a saving of 3.72 cents/kWh. If you use an average of 11.8 kWh/day, all you have to do is multiply this figure by 365 days to get your annual usage of 4,307 kWh. Next, multiply your savings of 3.72 cents/kWh by your annual usage at 4,307 kWh to get your annual savings for usage charges of $160.22/year.
Complete a similar calculation for supply charges. If your existing rate is 113.09 cents/day and the new plan you’re considering offers a rate of 99.55 cents/day, this equals savings of 13.54 cents/day. Multiplied by 365 days you get a savings for supply charges of $49.42/year.
Finally add the savings for usage charges together with the savings for supply charges to get your total annual savings of $209.64/year.
Don’t forget to include in your calculation any discounts offered by the electricity provider. For example, if a provider offers a usage rate of 29.61 cents/kWh and a 15% discount for paying your bill on time, subtract 15% from the rate to get an effective rate of 25.17 cents/kWh. Similarly, a daily supply charge of 133.05 cents/day would equal 113.09 after a 15% discount.
4. Switch to a better deal and start saving
Remember, you only get the benefits of a new deal when you make the effort to switch. Simply contact the energy retailer and inform them of your intentions. If you’re short on time or want to simplify the comparison process, you can call Foxie on 1800 275 369. Foxie has access to lots of great plans from Australia’s top electricity providers. Click here to see our list of providers.
We offer independent, unbiased, and 100% free advice for Australian consumers. If you want help finding the right deal for your household or business, our friendly Australian-based staff are just a phone call away.
Understanding the difference between the VDO and market offers
The VDO was introduced by the Victorian Government to ensure equal access to fair and affordable electricity and gas plans. All customers who were on a standing offer on the rollout date of 1 July 2019 (typically people who had lived at the same address for many years without switching their electricity plan or provider) were automatically transferred to the VDO. This flat rate energy plan is set by the Essential Services Commission, with no discounts and sign up incentives available. While the VDO is simple to understand and easy to budget for, it is also generally more expensive.
Consumers not on the VDO are instead on a market offer set by their specific electricity retailer. Market offers are not controlled by the Essential Services Commission, with rates known to vary widely and increase at the discretion of retailers. Unlike the VDO, the rates you are charged on a market offer depend on the individual retailer and specific energy plan.