Australian households and small businesses in New South Wales, South East Queensland, and South Australia could see their electricity bills fall from 1 July 2026, following a draft determination by the Australian Energy Regulator (AER). The draft Default Market Offer (DMO) for the 2026-27 financial year, released on 19 March 2026, proposes significant reductions, primarily driven by a substantial drop in wholesale electricity costs. The final decision is expected by 26 May 2026.
The AER’s draft decision indicates potential annual price decreases for residential customers ranging from 1.3% to 10.1%, while small businesses could benefit from reductions between 7.6% and 21.2%, depending on their distribution network.
These proposed reductions mark a welcome shift after several years of rising energy costs and are largely attributed to a sustained decline in wholesale electricity prices across the National Electricity Market (NEM).
“This draft decision points to the potential for some welcome relief for households and small businesses after several years of rising energy costs following Russia’s invasion of Ukraine,” AER Chair Clare Savage said. “The reductions reflect easing costs across parts of the electricity supply chain, particularly wholesale energy where we’ve seen falling electricity contract prices, reduced spot price volatility, and increased output from wind and battery generation.”
Wholesale Prices Drive Downward Trend
The Australian Energy Market Operator’s (AEMO) Quarterly Energy Dynamics (QED) report for Q1 2026, published on 28 April 2026, provides the underlying data supporting the AER’s optimistic outlook. The report highlighted that renewable generation reached a record high for a first quarter, supplying 46.5% of the NEM’s total generation. This surge was primarily driven by increased wind and solar output, with grid-scale and household batteries playing an increasingly pivotal role in stabilising the grid.
According to AEMO, the average wholesale electricity price across the NEM fell by 12% year-on-year in Q1 2026, settling at AUD $73 per megawatt-hour (MWh). This represents a significant moderation compared to previous periods of high volatility. East coast wholesale gas prices also reached a four-year low in March, averaging AUD $9.22/GJ, despite elevated international liquefied natural gas (LNG) prices.
Proposed DMO Reductions by State
The draft DMO outlines specific savings across different regions:
| Region | Customer Type | Proposed Annual Decrease (Avg.) | Percentage Decrease |
|---|---|---|---|
| New South Wales | Residential | Up to -$226 | Up to 8.2% |
| Small Business | Up to -$1,320 | Up to 21.2% | |
| South East QLD | Residential | Up to -$216 | Up to 10.1% |
| Small Business | Up to -$550 | Up to 12.8% | |
| South Australia | Residential | Up to -$31 | Up to 1.3% |
| Small Business | Up to -$845 | Up to 15.2% |
Source: AER Draft Default Market Offer 2026-27. Figures are approximate and depend on distribution zone and usage.
These figures apply to customers on standing offer contracts, which serve as a safety net for those who haven’t actively switched to a market offer. The DMO also acts as a reference price, helping consumers compare the competitiveness of various market offers.
Introducing the Solar Sharer Offer
Beyond the general price reductions, the AER’s draft determination also introduces a new “Solar Sharer Offer” set to commence from 1 July 2026. This opt-in electricity plan is designed to help households leverage Australia’s abundant solar energy by offering three hours of free electricity usage during the middle of the day.
Initially available in New South Wales, South East Queensland, and South Australia, the free usage periods are set for 11 am to 2 pm in NSW and SE QLD, and 12 pm to 3 pm in SA. Customers with smart meters, even those without solar panels, could benefit by shifting high-energy activities like running appliances or charging electric vehicles to these periods.
This initiative aligns with broader efforts to optimise grid stability and reduce overall electricity system costs by encouraging demand during periods of high solar generation. For those looking to maximise their savings, understanding and utilising such time-of-use tariffs, potentially in conjunction with home solar and battery systems, will be crucial. For more insights on optimising energy usage, consider reading our guide on How to Cut Your Electricity Bill This Winter in Australia 2026: Strategies After Federal Rebates End.
What This Means for Consumers
The impending final DMO decision in late May will provide clarity on the exact price changes. While the draft suggests a positive outlook, consumers are always encouraged to compare offers from different retailers to ensure they are on the most competitive plan. The DMO is a safety net, but market offers can often provide greater savings.
For those not currently on a market offer, or who haven’t reviewed their plan recently, the period leading up to 1 July 2026 presents a prime opportunity to engage with the market. The introduction of the Solar Sharer Offer also highlights the growing importance of smart energy management and potentially investing in technologies like home batteries to take advantage of cheaper daytime power. Learn more about Best AI Energy Management Systems for Australian Homes with Solar & Batteries in 2026: Maximise Savings and Self-Consump.
While the federal government’s broader Energy Bill Relief Fund ended on 31 December 2025, state and territory schemes may still offer targeted assistance. The AER’s continued monitoring of global energy market developments, particularly in the Middle East, underscores the ongoing need for caution, as such events can still influence forward wholesale electricity contracts.
Overall, the draft DMO and AEMO’s latest report paint a picture of a transitioning energy market where increased renewable integration and strategic policy interventions are beginning to translate into tangible price benefits for Australian consumers. This is a crucial development as Australians prepare for winter, where heating costs can significantly impact bills. For advice on managing these, see Winter is Coming: How to Slash Your Australian Heating Bills in 2026 as Energy Rebates End.