The Essential Services Commission’s draft decision on the 2026-27 Victorian Default Offer (VDO) proposes a reduction in each of the state’s five electricity distribution zones.

On average, domestic customers would save $46 a year (three per cent) and small business customers would save $172 (five per cent).

The commission independently reviews the VDO each year.

It is a fair, independently set electricity price that:

• Gives Victorians access to a reasonable electricity deal, even if they are unable or unwilling to engage in the retail market

• Acts as a reference price so customers can more easily compare different deals in the market

• Is the maximum amount electricity retailers can charge customers in an embedded network, such as an apartment complex, retirement home or caravan park.

Approximately 17 per cent of households (510,000) and 21 per cent of small businesses (61,000) are currently on the VDO.

There are approximately 190,000 people living in apartments, retirement villages and caravan parks who cannot choose their own electricity supplier.

The VDO is the maximum a retailer can charge these customers.

Lower environmental costs are the primary reason for the proposed decrease.

The commission continues to monitor all costs affecting energy prices, which can influence its final VDO decision in May.

Essential Services Commission chairperson and commissioner Gerard Brody said the Victorian Default Offer is set independently of energy retailers, which ensures all Victorian households and small businesses have access to a fair and reasonable price.

“The default offer gives people confidence that they’ll continue to receive a fair deal without having to test the market each year," he said.

“If you’re someone who is willing and able to review your electricity plan each year, you’ll be able to find cheaper deals.

"But if you don’t want to be swapping deals each year, the default offer is a good, fair option.

“The commission has made this draft decision with the best available data and with consideration for long-term interests of Victorian consumers with respect to price, quality and reliability of essential services.”

Annual prices for domestic customers on the VDO would decrease across the five distribution zones by between $43 and $48, compared to 2025-26.

Annual prices for small businesses on the VDO would decrease across the five distribution zones by between $165 and $179, compared to 2025-26.

A Victorian government spokesperson said they know the cost of living is still tough for many Victorians.

"Only Labor will invest in the energy infrastructure needed to lower bills and crack down on big energy retailers taking advantage of Victorian families," they said.

"Victoria's draft default offer is going down - meaning families on the offer will see their power bills reduced by $46 a year and for small businesses it will go down $172 a year."

Consultation on the draft decision, which includes a public forum, runs until 5pm, 10, April.

The commission’s final decision due in May.