Victoria Australia’s energy regulator has confirmed that electricity prices will fall across all five distribution zones in 2026–27, reducing annual bills for households and small businesses, driven by lower wholesale electricity costs, declining environmental compliance costs, and growing contributions from renewable energy. The decision adds to evidence that investments in renewables, energy efficiency programmes and grid modernisation can improve affordability while supporting the energy transition. In an article on the Renew Economy website, Sophie Vorrath discusses latest developments. Are you seeing the same in your country?
Electricity bills to fall even further than predicted in state as renewables share nears 50 pct
The cost of electricity will fall in all five of Victoria’s electricity distribution zones, the state’s pricing regulator has confirmed, cutting household energy bills by an average of $84 in the coming financial year and by an average of $241 a year for small businesses.
The Essential Services Commission (ESC) final determination on the 2026-27 Default Victorian Offer (VDO) sets the catch-all price of power even lower than was initially projected in the draft decision in March, giving the state Labor government a welcome win with cost-of-living conscious voters ahead of the November state election.
The VDO caps the price electricity retailers in the state can charge a small proportion of household and small businesses on standing offers. Around 512,000 households and 62,000 small businesses currently on the VDO will benefit directly from an immediate price cut when the new rates take effect.
But like the Default Market Offer (DMO), which is set separately by the Australian Energy Regulator for the rest of the National Electricity Market (NEM) states, it also acts as a sort of benchmark for all retail offers.
In its final call on the VDO for 2026-27, the ESC proposes that prices for domestic customers will decrease across the board by between as much as $160 for AusNet customers down to $50 for United Energy customers, averaging out at a roughly 5 per cent drop, year-on-year.
Annual prices for small businesses on the VDO will fall across the five distribution zones by between $502 (AusNet) and $151 (Powercor) compared to 2025-26, averaging out at a 6 per cent decrease on last year, the ESC says.
“You can find a better deal by shopping around, but the default offer provides a simple, fair option to all households and small businesses,” said ESC chair and commissioner Gerard Brody in a statement.
“We continue to see retailers seeking new business, setting prices five or 10 per cent, sometimes more, below the VDO, so I think that customers can get better deals out there if they shop around,” Brody told Renew Economy.
“We look at … the wholesale market, and really focus there on futures costs, which have … not increased …[but rather have] actually come down a little bit since the draft determination.
“I think today, compared to a number of years ago, we’re less affected by … international gas markets and some of the international price spikes that can affect the electricity wholesale market, and more renewables and solar and batteries makes … an impact as well,” Brody said.
“The other driver, really, was around environmental costs, which have come down as well compared to last year. That’s really, you know, the costs of the Commonwealth schemes, and also the Victorian Energy Upgrade program.”
In Victoria, where the Labor government is targeting 65 per cent renewable generation by 2030 and 95 per cent by 2035, renewables now account for around 45 per cent of the state’s electricity mix.
In a statement on Monday, Victorian energy minister Lily D’Ambrosio said the Labor government’s record investment in renewables has meant the state “consistently has the lowest energy prices in the country.”
“Labor is investing in the efficient, renewable energy that Victoria needs to make life cheaper for Victorians,” D’Ambrosio said.
“Jess Wilson’s Liberals would send power prices skyrocketing by blocking renewable energy investment that will deliver replacement electricity.”
The Victorian Liberal Party in February announced that it will introduce “strict new independent audits and economic impact assessments on new energy developments” if elected in the state poll in November.
“Communities across regional Victoria are increasingly concerned about the Allan Labor government’s approach to rolling out renewable energy projects without properly considering the long-term impact on agriculture and food production,” shadow energy minister David Davis said.
D’Ambrosio says the state Liberals have also “repeatedly opposed” the Victoria Energy Upgrades program, which has been extended and expanded under the Allan government, and which the energy minister says has also been instrumental in pushing down bill costs.
“We 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,” the minister told Renew Economy in March.
Victorian households could also see a modest reduction in the costs of poles and wires in their electricity bills, even as the state’s five distribution network companies seek to claw back more money from increased spending.
The Australian Energy Regulator (AER) earlier this month published final revenue decisions for distribution network service providers (DNSPs) AusNet, Jemena, CitiPower, Powercor, and United Energy for the 2026-31 regulatory period.
The decisions include a combined $119 million across the networks to support initiatives for grid resilience during and after extreme weather events, and more than $112 million in new investment to improve network reliability.
For all of the DNSPs, this has meant a jump in five-year revenue of between $500 million and $1.7 billion, with Powercor – the regional DNSP jointly owned by Cheung Kong Infrastructure & Power Assets (51%) and Spark Infrastructure (49%) – chalking up a jump in recoverable revenue of nearly 50 per cent.
But the AER says that even with the hikes in revenue, high level estimates indicate a likely average annual decrease of between $6 and $38 in the distribution component of Victorian residential electricity customers’ bills across 2026-31.
“This is because, even with the increase in approved revenue, forecast higher demand would result in the increases being shared among more customers, leading to lower bills than in the current period,” the regulator said at the time.
“Whether bills continue to fall in the later years of the regulatory period will depend on whether the increases in demand are realised.”
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