VDO Price Rise and What It Means for Victorian Energy Consumers

Understanding the Victorian Default Offer (VDO)  

Electricity prices are a significant factor in the cost of living, especially in Victoria. For those on standing offers or looking to compare electricity prices, the Victorian Default Offer (VDO) serves as a crucial benchmark.  

The VDO is a regulated price set by the Essential Services Commission (ESC). It acts as a safety net for residential and small business customers who have not chosen a market offer with their retailer. The VDO also serves as a reference price, enabling consumers to compare electricity charges and offers with transparency.  

From 1 July 2025 to 30 June 2026, the new VDO prices will come into effect. This blog explains the latest changes for both residential and small business customers, the factors driving those changes, and how you can manage your energy costs during this adjustment period.  

Note: This information is general in nature and does not consider your objectives, financial situation, or needs. Please consider your circumstances or seek independent advice before making any decisions. 

Latest Updates to the VDO for 2025–26  

For Residential Customers  

• Usage Assumption: Estimated at 4,000 kWh annually  
• Price Changes by Distribution Zone  

Key drivers for residential price change include a 4% rise in network tariffs, slightly higher wholesale electricity costs (+2%), and a 17% drop in renewable energy scheme liabilities. Retail operating costs have decreased by 5%, with retail profit margins trimmed to ensure fairer pricing.  

For Small Business Customers  

• Usage Assumption: Estimated at 10,000 kWh annually  
• Price Changes by Distribution Zone  

Small business customers will see mostly modest changes, with some positive offsets due to falling environmental costs and reduced retail margins.  

Source: esc.vic.gov.au 

Why Are Prices Changing?  

Several factors influence the VDO adjustments annually. For 2025–26, the following have played an essential role in price movements.  

Key Drivers for Residential and Small Business Offers  

Higher Network Tariffs  

• Network tariffs, which contribute approximately 40% of a bill, have risen by 4% on average. These costs fund necessary upgrades to Victoria's ageing grid infrastructure.  

Wholesale Costs  

• Wholesale electricity prices, driven by forward contract prices, have increased by 2%. This reflects continued global and national volatility in fuel costs.  

Environmental Costs  

• Costs associated with renewable energy schemes have dropped by 17%, significantly lowering financial pressure on both residential and small business consumers. Schemes like the Victorian Renewable Energy Target (VRET) have matured, leading to reduced liabilities.  

Retail Operating Costs and Margins  

• Retail operating costs have decreased by an average of 5% due to business efficiencies. Meanwhile, retail profit margins have been reduced from 5.3% to 5.0%, signalling a commitment to fairer pricing.  

How the VDO Impacts Victorian Consumers  

The VDO changes have a mixed impact on households and businesses. While some zones like CitiPower have seen noticeable hikes, others such as Jemena show reductions. The VDO also serves as a benchmark for comparing market offers. By understanding these numbers, you can make informed decisions when selecting an electricity plan.  

How to Manage Energy Costs Under the New VDO  

Monitoring electricity prices doesn’t need to be overwhelming. By leveraging smart strategies, you can keep your bills as low as possible while maximising savings.  

Steps to Take  

• Compare Electricity Plans  

While the VDO is a safety net, market offers often provide better value. Use reliable comparison tools like Electricity Provider to compare power costs side by side.  

• Understand Your Usage Patterns  

Look at your usage habits and identify areas where energy conservation is possible. Use smart meters or apps to keep track in real time.  

• Switch Providers if Necessary  

Consider switching providers during the new VDO period. Learn how via our guide, How to Change Electricity Providers in Australia.  

• Invest in Energy Efficiency  

Consider switching to energy-efficient appliances or LED lighting to reduce consumption. Some households may also benefit from solar installations or batteries.  

• Explore Renewable Options  

With falling costs for renewable schemes, adding rooftop solar or opting for GreenPower might yield additional savings. Learn more through our blog on Choosing the Best Energy Plan in NSW.  

Make Smarter Choices for a Brighter Future  

Understanding the updated VDO rates is the first step toward controlling your energy expenses. With potential savings from informed decisions, Victoria’s electricity market changes can work to your advantage.  

Use tools like Electricity Provider to explore energy plans that may better suit your usage.