Electricity Prices Are Falling, But Check Your Daily Supply Charge Before You Celebrate

From 1 July 2026, the headline commercial electricity price benchmarks across NSW, QLD, SA and Victoria are all moving in the right direction. Usage rates are falling, and for most commercial customers the overall bill outcome should be positive. However, there is a separate component of your electricity bill that has been quietly moving in the opposite direction, and for some businesses it will partially or fully offset those savings.

Your electricity bill has two distinct cost components. Most of the coverage around the Default Market Offer (DMO) and the Victorian Default Offer (VDO) focuses on one of them. Our team has been reviewing the actual tariff changes going live tomorrow, and the full picture is worth understanding before you assume your bill will simply be lower.

Two components, two different directions

Every commercial electricity bill is made up of a usage charge and a daily supply charge. The usage charge is the variable part: it’s the rate you pay per kilowatt-hour (kWh) of electricity consumed, and it changes based on how much power your business uses. The daily supply charge is fixed: it’s a set amount you pay every single day regardless of whether you use any electricity at all. It covers the cost of being connected to the grid.

The DMO and VDO reductions announced for 2026-27 apply to the usage charge. That part is genuinely falling, in some regions by more than 10%. Network infrastructure costs, which primarily drive the daily supply charge, are mostly increasing in 2026-27 due to transmission upgrades, inflation and the recovery of previously under-recovered revenue from network businesses. Several major retailers have notified customers of supply charge increases that in some cases are substantial.

That example illustrates why the headline percentage reductions require some scrutiny. The net outcome for any individual business depends on the interplay between how much the usage rate has fallen and how much the daily supply charge has risen, measured against the business’s actual consumption volume.

Why usage volume is the critical variable

The daily supply charge is unavoidable. A business paying $1.92 per day in supply charges will pay roughly $700 per year in supply charges before a single kilowatt-hour is consumed. For a high-consumption commercial site drawing significant power each day, a lower usage rate can easily outweigh a higher supply charge. For a lower-consumption site, the fixed daily cost represents a larger share of the total bill, and the savings from a lower usage rate may not be enough to compensate.

This matters particularly for strata common area meters, small tenancies, businesses that have reduced their consumption through solar or efficiency upgrades, and any site where electricity use is modest relative to the connection cost. These customers are more exposed to supply charge increases because the fixed component dominates their bill structure.

Higher-consumption commercial and industrial sites are generally better placed. The more electricity a site uses, the more a lower usage rate works in its favour, and the supply charge increase becomes a smaller proportion of the total.

This is structural, not a temporary anomaly

The shift toward higher daily supply charges and lower usage rates is not a retailer quirk. It reflects a deliberate structural change in how electricity costs are recovered across the market. The Australian Energy Regulator’s reformed DMO framework for 2026-27 explicitly assigns fixed costs to the daily supply charge and variable costs to the usage rate. The logic is that network infrastructure costs are largely fixed regardless of how much electricity flows through the grid, so recovering them through a fixed daily charge is considered more cost-reflective.

As more rooftop solar reduces daytime grid consumption, networks still need to be maintained for the times when solar is unavailable. The fixed cost of that infrastructure doesn’t fall just because some customers are drawing less from the grid during the day. The expectation from industry bodies is that this structural shift toward higher fixed charges and lower usage rates will continue in future determinations, not reverse.

A new protection that limits the worst outcomes

One genuinely positive reform introduced with DMO 8 is that the AER has, for the first time, placed caps on both usage rates and daily supply charges for standing offer customers, not just the total annual bill. Previously, retailers could structure their tariffs however they chose provided the overall annual benchmark was met. That meant a retailer could set a very high supply charge and a low usage rate, or vice versa, making fair comparisons across plans difficult.

The new tariff-level caps mean standing offer customers have some protection against supply charges being set at extreme levels. A separate reform from the Australian Energy Market Commission (AEMC), also taking effect 1 July 2026, restricts retailers from raising prices on variable market contracts more than once per year. Previously, retailers could adjust variable plan rates at any time, making it difficult for customers to budget with any certainty. These reforms together improve transparency and give customers a more stable and comparable basis for reviewing their options.

For customers on market offers, those caps apply to standing offers only. Market offer pricing remains commercially set by retailers, though the regulated benchmark continues to shape how competitive offers are structured and presented.

What this means when reviewing your contract

When our energy managers review a commercial electricity contract, we look at both components together. A plan advertising a competitive usage rate may be less attractive once the daily supply charge is factored in, particularly for lower-consumption sites. Conversely, a plan with a higher usage rate but a lower supply charge can deliver better outcomes for sites that don’t use large volumes of power.

The new tariff-level caps make this comparison more straightforward for standing offer customers. For market offer customers, our team compares the full tariff structure across available plans, not just the headline rate, as part of our standard energy cost reduction process.

With the market having shifted and new tariff structures now in place from 1 July, contracts signed 12 to 24 months ago were priced under a different cost environment and a different tariff framework. That gap is worth examining across your portfolio, particularly for any sites where consumption has changed or where the supply charge component of the bill has grown relative to usage.