Many Australian households are questioning why their electricity bills remain high in 2026, even as wholesale electricity prices have fallen significantly. The direct answer lies in a shift in how energy costs are structured: while usage rates are generally decreasing for most regions under the new Default Market Offer (DMO) and Victorian Default Offer (VDO) effective July 1, 2026, fixed daily supply charges are increasing for many customers. This change, coupled with the expiry of the federal Energy Bill Relief Fund, means your overall bill might still feel the pinch, particularly if you’re a low-usage household.
The Disconnect: Falling Wholesale, Rising Retail Bills
Australia’s energy market is undergoing a rapid transformation. The first half of 2026 saw average wholesale electricity prices in the National Electricity Market (NEM) plunge by nearly 50% in the June quarter, reaching six-year lows in some areas. This dramatic reduction is primarily driven by a surge in renewable energy generation, particularly wind and solar, and the rapid expansion of battery storage capacity. For instance, in Q2 2026, wholesale prices in Victoria fell 60% to $56/MWh, and in NSW, they dropped 53% to $75/MWh.
However, these wholesale savings don’t always translate directly to lower retail bills for consumers. Retail electricity bills are made up of several components:
- Wholesale Costs: The cost retailers pay for electricity in the market.
- Network Costs: Charges for maintaining and upgrading poles, wires, and other infrastructure (often the largest component).
- Retail Costs: Operational costs for billing, customer service, and marketing.
- Environmental & Government Scheme Costs: Charges related to renewable energy targets and other programs.
- Fixed Daily Supply Charge: A daily fee for connecting to the grid, regardless of how much electricity you use.
- Usage Charges (Variable): The cost per kilowatt-hour (kWh) of electricity consumed.
While wholesale costs are currently declining, other components, particularly network costs and a strategic shift by retailers, are influencing the final bill. The Australian Energy Regulator (AER) and Essential Services Commission (ESC) in Victoria have adjusted their DMO/VDO methodologies for 2026-27 to more explicitly define tariff structures. This has resulted in a greater emphasis on fixed daily supply charges, with comparatively lower usage rates.
Understanding the Rise in Fixed Supply Charges
From July 1, 2026, many energy retailers have opted to increase their fixed daily supply charges while simultaneously reducing their per-kilowatt-hour usage rates. This means you pay more just for being connected to the grid, irrespective of your consumption.
“We’ve seen some companies – not all, far from it – choose to increase their fixed supply costs while reducing their per-kilowatt hour costs.” – Chris Bowen, Minister for Energy
This shift can disproportionately affect households that use less electricity, such as those with solar panels or individuals who are highly energy efficient, as a larger proportion of their bill becomes fixed. For example, some customers in NSW and Queensland have reported significant increases in daily supply charges from retailers like AGL, EnergyAustralia, and Origin.
Example Daily Supply Charges (Indicative for 2026-27 DMO regions):
| State/Network | Daily Supply Charge (Flat Rate, Residential) | Source/Notes |
|---|---|---|
| NSW (Ausgrid) | $1.66/day | AER DMO 2026-27, effective July 1, 2026 |
| NSW (Endeavour Energy) | ~$1.25/day | Indicative, previous DMO |
| NSW (Essential Energy) | ~$1.25/day | Indicative, previous DMO |
| South East QLD | ~$1.30/day | Indicative, previous DMO |
| South Australia | ~$1.15/day | Indicative, previous DMO |
Note: Specific charges vary by retailer, tariff, and distribution zone. Always check your individual bill or energy plan details.
Default Market Offer (DMO) and Victorian Default Offer (VDO) for 2026-27
The DMO (for NSW, South East Queensland, and South Australia) and VDO (for Victoria) act as a safety net, setting the maximum price retailers can charge customers on standing offer contracts. They also serve as a reference price for comparing market offers.
For 2026-27 (effective July 1, 2026), the AER and ESC have announced the following changes for residential customers on standing offers:
DMO Regions (NSW, SE QLD, SA):
- New South Wales: Residential flat-rate standing offer prices will fall by between 3.4% and 5.0%. For time-of-use DMO customers, prices will decrease between 3.7% and 7.7%.
- South East Queensland: Residential flat-rate standing offer prices will fall by 7.2%, saving a typical household around $155 annually. Time-of-use customers will see decreases of up to 10.7%.
- South Australia: Residential flat-rate standing offer prices will see a modest increase of 1.4% (around $33 per year). However, time-of-use customers will experience a small decrease of 1.1%.
VDO Regions (Victoria):
- Average annual bills for domestic customers are expected to be 5% lower. Prices have decreased by between 3.2% and 8.4% across Victoria’s distribution zones.
Small businesses will generally see larger reductions across all DMO and VDO regions.
It’s crucial to remember that these DMO/VDO changes apply to standing offers, which typically cover a minority of customers (around 8% of households and 15% of small businesses). Most Australians are on market offers, which are competitive plans set by retailers. While market offers often follow DMO trends, retailers have flexibility, and their price changes might differ.
The End of Federal Energy Bill Relief in 2026
Adding to the pressure, the universal federal Energy Bill Relief Fund concluded on December 31, 2025. This means the automatic credits of up to $300 for households (2024-25) and $150 (July-Dec 2025 extension) are no longer being applied to bills. The absence of this direct financial support means households are now exposed to the full retail price of electricity.
What You Can Do to Manage Your Electricity Bill in 2026
Despite the complexities, there are actionable steps you can take:
- Compare Your Energy Plan: Don’t rely on being on a standing offer. Use government comparison websites like Energy Made Easy (for NSW, QLD, SA, ACT, TAS) or Victorian Energy Compare (for VIC) to find the best market offer for your usage patterns. Many market offers are significantly cheaper than standing offers. You can find more detailed advice in our guide: Choosing Your Australian Energy Provider in 2026: A Definitive Guide.
- Understand Your Tariff: If you have a smart meter, consider a time-of-use (ToU) tariff. The DMO and VDO for 2026-27 now include comparison prices for ToU tariffs, and time-of-use customers are generally seeing greater savings.
- Embrace the Solar Sharer Offer: Introduced from July 1, 2026, the Solar Sharer Offer (SSO) requires retailers in DMO regions to provide smart meter customers with three hours of free electricity during the middle of the day (e.g., 11 am-2 pm in NSW/SEQ, 12 pm-3 pm in SA). This is available even if you don’t have solar panels and can significantly reduce bills if you shift high-usage activities to this period.
- Check for State-Based Energy Rebates and Concessions: While federal relief has ended, state and territory governments continue to offer targeted support for eligible concession card holders, pensioners, and low-income households. These can be substantial, ranging from hundreds to over a thousand dollars annually. Examples include:
- NSW: Low Income Household Rebate (up to $285/year), Family Energy Rebate (up to $180/year), Seniors Energy Rebate ($200/year).
- Victoria: Annual Electricity Concession (17.5% off bill), Winter Gas Concession. You can find more details in our guide: Victorian Energy Concessions for Pensioners 2025 2026 in Australia: Complete Guide.
- Queensland: Electricity Rebate ($386.34/year).
- ACT: Electricity, Gas and Water Rebate ($800/year for 2025-26).
- South Australia: Cost of Living Concession (energy component).
- Tasmania: Annual Electricity Concession, Heating Allowance. Check your state government’s energy or social services website for eligibility and application details. For a comprehensive overview, see our guide: Australian Energy Rebates in 2026: Your State-by-State Guide After Federal Relief Ends.
- Invest in Energy Efficiency: Reducing your overall consumption remains one of the most effective strategies. This includes improving insulation, draught-proofing, using energy-efficient appliances, and adjusting heating/cooling habits. Look for state rebates for insulation upgrades.
- Consider Solar and Batteries: With falling wholesale prices during the day, generating your own power with rooftop solar, potentially combined with a home battery system (which has seen significant growth in 2026), offers a strong buffer against grid volatility and rising fixed charges.
Bottom Line
While the underlying wholesale electricity market is seeing positive trends with lower prices driven by renewables and batteries, many Australian households are experiencing higher electricity bills in 2026 due to increased fixed daily supply charges and the cessation of federal energy relief. The key to managing your energy costs this year is active engagement: compare market offers, understand your tariff structure, leverage new initiatives like the Solar Sharer Offer, and ensure you’re claiming all eligible state-based concessions. Don’t assume your current plan is the best deal; shopping around could save you hundreds of dollars annually.