Yesterday, we saw the announcement by the Minister for Climate Change and Energy Chris Bowen of the introduction of the Solar Share Offer (SSO) as part of broader changes that will be made to the formulation and application of the Default Market Offer (DMO) from July next year.

The SSO will mean that a standing offer in South East Queensland, New South Wales, and South Australia will need to include hours of ‘free’ electricity corresponding with the period where Solar PV is typically exporting.

One assumption behind the SSO is that additional network upgrades will, at least in part, be avoided as the demand curve is smoothed. Structurally, once implemented, the intent is to shift a proportion of electricity demand in the market, as consumers, who are able to take advantage of the ‘free’ hours of electricity, charge home batteries or electric vehicles and operate home appliances during the free window.

In this article, I explain the changes that will be made to the DMO, including the SSO, and the potential implications for energy sellers in New South Wales, South East Queensland, and South Australia.

Key points about the SSO

The SSO will be a standing offer which includes free electricity during the ‘solar window.’ It is proposed to be available to:

• residential customers;
• with smart meters;
• in SE QLD, NSW, and SA
• who are on the relevant standing offer

Background to this outcome

These changes have come out of the Commonwealth Department of Climate Change, Energy, the Environment and Water’s broader review of the Default Market Offer. The DMO was introduced in August 2018 in response to concerns raised by the Australian Competition and Consumer Commission that the existing framework for standing offers was no longer fit for purpose.

Before the introduction of the DMO, individual retailers were free to set their own standing offer prices. As a consequence, retailers would typically set higher standing offers and advertise significant discounts to their standing offers within their market offers- with consumers who unknowingly, or by default, ended up on standing offers paying significantly more. The so called ‘loyalty-tax’ has continued with a proportion of consumers continuing to stay on standing offers, now capped at the DMO.

We’ve been aware of the DMO review, and knew that it was likely that some important changes would be made, such as an extension of the DMO to embedded networks — I spoke to RenewEconomy about this in October. The purpose of the DMO review was to improve protections for consumers, particularly those who are disengaged or unwilling to participate in the market. The outcome of the review was published yesterday, 4 November 2025.

The changes in more detail

As a consequence of this recent DMO review, the Department recommended that the DMO be changed to clearly focus the framework on the objective of ensuring that all consumers can access a fair, trusted, and reasonably priced electricity offer which reflects the essential nature of the service.

The review recommended that the DMO be extended to apply to embedded networks so that all small customers can receive pricing protections regardless of their connection type. Noting the role of the DMO in its use as a comparison tool, the Department has also proposed enhancements to improve its effectiveness as a comparison tool and to improve customer access to their data through the consumer data right along with further development of comparison tools and websites. Presumably this means that there will be changes to energymadeeasy.gov.au including to incorporate more useful comparisons.

Finally, the Department recommended the SSO being a ‘free power’ residential time of use standing offer for customers with smart meters. The Department stated in the outcomes paper that “bringing on greater load in the middle of the day will smooth the duck curve and enhance the stability of the power system benefiting all consumers and improving system security.”

Recommendation 1: Introduce a new guiding objective for the DMO, focussed on protecting small customers on standing offers and small customers in embedded networks

The first recommendation is to introduce a new DMO objective into the Electricity Retail Code, which is to protect households and small businesses on standing offers and in embedded networks by providing a fair, trusted, and reasonably priced electricity option that reflects the costs of supplying customers with an essential service.

 This new objective will be material as it will be a guiding principle for the AER used when determining the DMO each year. How the DMO is determined will be closely considered by energy retailers with the introduction of the SSO.

Recommendation 2: The AER would be required to determine the DMO to best achieve the DMO objective

The AER will be required to determine the DMO in a way that is most likely to achieve the DMO Objective and is otherwise consistent with the Electricity Retail Code.

When determining the DMO, the AER will be required to consider the efficient costs to supply small customers on standing offers and small customers in embedded networks, including modest costs associated with customer acquisition and retention and no competition allowance.

Recommendation 3: The AER would be required to publish a DMO guideline setting out its approach to determining the DMO

The DMO Guideline will set out the AER’s proposed approach to determining a DMO and meeting the DMO Objective and requirements of the Code, including the AER’s intended approach to identifying cost components.

Recommendation 4: DMO protections would be extended to all customers on standing offers and all small customers supplied by authorised retailers in embedded networks

Consistent with the DMO Objective, all customers on standing offers and all customers supplied by authorised retailers in embedded networks would be protected by the DMO.

This would result in new standing offer offers available for customers on flexible demand tariffs and business standing offer customers with time of use tariffs.

Recommendation 5: To improve protections to small customers, the DMO would be expressed as a regulated tariff for common standing offer tariff types

The DMO will be expressed as a tariff cap for common standing offer tariff types, with a cap determined for each of the specified tariff structures, including:

• Flat rate tariff for residential customers
• Flat rate tariff with controlled load for residential customers
• Flat rate tariff for small business customers
• Time of use tariff for residential customers
• Time of use tariff for small business customers

Recommendation 6: The AER would have the discretion to determine a DMO regulated tariff for other standing offer or embedded network tariff types

The AER would have discretion to determine a DMO regulated tariff for other standing offer or embedded network tariff types. In making that determination, the AER would consider whether such determination would promote the DMO Objective, whether the maximum annual bill provides sufficient protection to the relevant small customer type, and the value of a trusted and transparent comparison tool for relevant market offers.

This recommendation extends beyond standing offers – to embedded network tariffs more generally, which may encompass a separate cap on pricing for embedded network customers who are supplied by exempt sellers. However, noting that the current small customer pricing cap (for exempt sellers in those states that have adopted the National Energy Customer Framework) is the standing offer of the local area retailer, under the AER’s Retail Exempt Seller Guideline. This also comes at a time where jurisdictions such as NSW are introducing their own embedded network pricing caps.

Recommendation 7: The AER would determine a maximum annual bill amount for types of customers on standing offers and small customers in embedded networks for which there is no DMO regulated tariff

Under this recommendation, the AER would determine a maximum annual bill amount for representative types of customers on standing offers and small customers in embedded networks for which there is no DMO regulated tariff. The maximum annual bill amount would be based on model usage determined by the AER.

The purpose of this recommendation is to ensure that any small customer not on a tariff type captured by Recommendations 5 or 6 would still have access to a form of pricing protection under the DMO.

Recommendation 8: Prices for small customers on standing offers and small customers in embedded networks would be required to comply with the DMO

This recommendation would extend the application of standing offer price protections to authorised retailers operating in embedded networks. It would mean that the market offer price for small customers in embedded networks would be required to comply with the DMO regulated tariff or maximum annual bill amount, and that any energy-only offer offers for small customers in embedded networks must comply with the DMO regulated tariff or maximum annual bill amount.

Recommendation 9: All small customers on market offers would have the benefit of the DMO as a comparison price

This will extend the current DMO under which the DMO reference price is only a comparison price for small customers on market offers that are on tariff types covered by the DMO. The extension would mean that all customers on market offers would have the benefit of the DMO as a comparison price.

Recommendation 10: Solar Sharer Offer

To implement the SSO, changes would be made to the Electricity Retail Code to require all electricity retailers to offer a regulated free power period standing offer or an approved alternative offer. This would initially apply in DMO jurisdictions from 1 July 2026, with further consultation on whether to have this or an equivalent applied to households nationally from 2027.

A further consultation is being conducted on the SSO implementation. Submissions on that consultation close on 21 November 2025.

 

Transitional arrangements

The Department has recommended that transitional arrangements be in place to allow the AER sufficient time to operationalise the recommendations, including:

1. The publication of the first DMO Guideline before DMO 9 (2027-2028).
2. Consultation on whether the DMO should regulate additional tariff caps as part of the DMO guideline consultation.
3. The extension of DMO protection to embedded network customers taking effect for DMO 9 to allow the AER sufficient time to collect information and to consider the cost structure for these customers.

 

Implications

The SSO will place pressure on retailers to adjust their market offers, so we can expect changes to pricing for residential customers with smart meters in the relevant jurisdictions. Consumers can be expected to respond to these pricing changes with a greater uptake of technologies that can take advantage of the free electricity periods- including smart meters.

The changes are being made via the Electricity Retail Code, energy retailers will still be liable to pay the DNSPs for network costs and to purchase electricity on behalf of their customers during the solar free periods. One wonders if energy retailers may seek to challenge the changes in court on the basis that they are (without commenting on the merits or otherwise) in some way analogous to compulsory acquisition. Such arguments have been made in other contexts in the past including in the High Court of Australia. This is certainly an option retailers would be considering.

Energy retailers will seek to recover lost revenue from the SSO via other offers and by shifting higher priced periods and by increasing daily supply charges. As a consequence, from the perspective of reducing energy costs, the net effect (for consumers) may be minimal unless network tariffs increase at a slower rate than they have been in response to a change in load profile.

Energy retailers will also focus on ensuring that costs incurred are properly reflected in the DMO determinations by the AER. With the new DMO Objective and shift in focus, that will be harder for retailers than it has been in the past. We can expect both on-market and embedded network retailers to consider this closely. From today, the AER has now opened up consultation on DMO 8 here.

Consumers that have the capacity to take advantage of free solar hours will see the greatest individual benefit including those who work from home, have home battery systems and electric vehicles.

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