Major Relief Coming for Australian Households
After years of soaring energy costs that have strained household budgets, the Australian Energy Regulator (AER) has delivered welcome news with its draft determination proposing reductions in Default Market Offer (DMO) prices across all regulated regions - New South Wales, South East Queensland and South Australia - driven largely by lower wholesale electricity costs.
If adopted in the final determination, DMO annual prices for residential customers would fall by between 1.3% and 10.1%, while small business prices would decrease by between 7.6% and 21.2%, depending on the region.
For Queensland households, the news is particularly positive, with residential prices set to decrease by 10.1% (-$216), and small business prices by 12.8% (-$550). New South Wales customers could see residential prices decrease by 2.4% (-$58) to 8.2% (-$226), while small business prices would fall by 7.6% (-$379) to 21.2% (-$1,320) depending on the distribution area.
“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.” — Clare Savage, AER Chair
What’s Driving the Price Falls
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.
The energy landscape is transforming rapidly. Wholesale electricity prices across the National Electricity Market (NEM) have been falling as solar and wind generation displace more expensive gas-fired and coal-fired power stations. Gas made up 6.6% of electricity production in 2022 but just 4.5% in 2025. Coal dropped from 58.3% to 51.9% over the same period.
Battery storage is playing an increasingly important role. Grid-scale battery installations have accelerated across the NEM in 2025 and 2026. Projects like the Victorian Big Battery (300MW), the Waratah Super Battery in NSW (850MW), and the Bouldercombe Battery in Queensland (200MW) are storing cheap midday solar energy and releasing it during expensive evening peaks. This “peak shaving” effect directly reduces the wholesale price spikes that drive up the annual cost benchmarks used to calculate the DMO.
New Solar Sharer Offer Brings Free Daytime Power
The draft determination also introduces the Solar Sharer Offer, a new opt-in electricity plan that includes three hours of free usage during the middle of the day to help households take advantage of abundant solar energy and lower total electricity system costs for all customers. The free usage periods are set to be 11am to 2pm in New South Wales and South East Queensland, and 12pm to 3pm in South Australia.
The SSO will require retailers to offer free electricity to households with smart meters for at least 3 hours in the middle of the day when solar generation is at its peak. Customers will be able to access up to 24 kWh of free electricity during the daily window.
Geopolitical Risks Could Dampen Savings
Despite the positive outlook, the AER has flagged potential complications. The wholesale cost of electricity, included in this draft decision, was calculated prior to the commencement of the current conflict in the Middle East. Since the conflict began, we have seen increases in the price of forward wholesale electricity contracts for 2026-27. However, even at these recent elevated levels, these forward contracts are still currently lower than last year, and well below the levels seen during the 2022 energy market events.
Domestic gas prices are linked to international spot prices, which have risen 15-20% since the Iran conflict escalated in February 2026.
End of Government Energy Rebates Adds Urgency
The timing of these price reductions is crucial, as Australia’s universal energy bill rebates are ending. After two years of automatic credits quietly reducing household power bills, most homes will stop receiving government relief from January 2026. Australian households and eligible small businesses with electricity bills received up to $150 in energy bill rebates from 1 July 2025 to the end of 2025. Rebates were automatically applied to electricity bills in two $75 quarterly instalments.
What Happens Next
The AER’s draft DMO determination 2026-27 is now open for consultation for three weeks and there may be movements in the final price outcomes. The AER will consider stakeholder feedback and updated market data before releasing its final decision by 26 May 2026, with the new DMO taking effect on 1 July 2026.
For consumers, the AER emphasises that while these reductions are encouraging, the overall message to consumers remains to shop around for a better deal than the DMO. “The Default Market Offer may not be the cheapest electricity plan available, but it provides a fair and reasonable option for someone who hasn’t or doesn’t want to engage in the market,” she said.