The VDO, or Victorian Default Offer, is a ‘failsafe’ for consumer and small business energy customers in Victoria.
Energy retailers can provide you with the VDO if you’ve never signed up for an electricity contract. This could be because you moved into a new address and started using electricity without entering into a contract. You can also request this plan from any retailer and they must provide it.
It also acts as a benchmark or reference price, which is a way of expressing how an alternative plan stacks up against the VDO. Using the reference price helps you compare ‘apples with apples’ when comparing plans.
A bigger percentage off the reference price usually means a cheaper plan. So, if a plan is advertised at 12% off the VDO, it means that it’s 12% cheaper than an average customer would pay if they were on the VDO. There’s a bit more science to it, as the comparisons are based on an estimated annual cost.
Access to a fair deal for all customers
The ESC (Essential Services Commission) who regulate energy in Victoria were responsible for the introduction and setting of the VDO. They define it as “a simple and trusted electricity price that is set by [the ESC], not energy companies. It provides Victorian consumers access to a fair electricity deal even if they are unable or unwilling to engage in the retail market.”
The VDO was first introduced in July 2018, in response to a need for greater ‘fairness’ in the retail electricity industry, and as a way to close the gap between the highest and the lowest cost a consumer could be paying for their retail electricity.
In the past, Standing Offers were never good value for customers. They were often the most expensive rate a customer could be on. Now that the VDO has replaced Standing Offers, no matter what retailer you are with, there is at least a ‘ceiling’ to what you will pay for electricity.
However, it’s important to remember that there will be better offers than the VDO out there for most customers. It’s always worth checking around to see what you can save.
Some things to check on …
- If you’re not sure whether you are on the VDO or not, check your bill for plan details. Or you can ask your retailer whether you are on the VDO or a market contract.
- If you are on the VDO there is a strong chance you can find a cheaper plan, either from your current retailer or another one.
- An alternative to the VDO is to ask for a retailer’s best offer. This will be a market contract and will be much more competitively priced.
- The VDO is reset by the ESC every 12 months in January, so it’s a good time to check on the competitiveness of your plan. This is especially true if the VDO has become cheaper, as retailers will more than likely offer new deals at more competitive rates to attract customers.
So, is the VDO a good plan?
Yes, it’s good in that it provides protection for consumers who are not on a market contract, and who have not actively participated in the energy market. It is also good in that it provides a way to compare ‘apples and apples’ through the reference price. All retailers need to adopt this as a comparison point when communicating their offers to customers. However, it is not the cheapest or the best price you will pay for electricity in Victoria. It is always good to check the market for more competitive deals that will suit your energy needs.
