Victorian electricity prices are falling from 1 July 2026. The Essential Services Commission (ESC) has confirmed the new Victorian Default Offer (VDO) for 2026–27, delivering an average reduction of approximately 5% for households across all five distribution zones — an average saving of around $84 per year. Small businesses see an average reduction of about 6%.
Unlike NSW, South East Queensland and South Australia — which are covered by the Australian Energy Regulator's Default Market Offer (DMO) — Victoria sets its own benchmark price through the ESC. Victoria also has more distribution zones (five) and the most competitive retail market in the country, where market offers can sit up to 25% below the VDO.
This article breaks down the new VDO reference prices zone by zone, explains what drove the reduction, and shows why the headline percentage doesn't tell the whole story — particularly for lower-usage households.
Compare Victorian electricity plans at your address
See how your current plan stacks up against the new VDO — market offers can be up to 25% below it.
The table below shows the annual VDO reference prices for a representative residential customer on a flat-rate standing offer in each of Victoria's five distribution zones, alongside the approximate change and estimated annual saving.
| Distribution zone | VDO 2026–27 | Change | Est. annual saving |
|---|---|---|---|
| CitiPower (inner Melbourne) | $1,546 | ~-5% | ~$77 |
| United Energy (south-east Melbourne / Mornington) | $1,579 | ~-5% | ~$79 |
| Jemena (north-west Melbourne) | $1,638 | ~-5% | ~$82 |
| Powercor (western VIC / outer-west Melbourne) | $1,703 | ~-5% | ~$85 |
| AusNet Services (eastern VIC / Yarra Valley) | $1,908 | ~-5% | ~$95 |
Source: Essential Services Commission, Victorian Default Offer 2026–27. Reference prices are for a representative residential flat-rate customer. The ~5% change and estimated savings are approximate and derived from the ESC's announced average reduction; actual savings vary by zone, usage and your current plan.
The ~5% reduction is driven primarily by falling wholesale electricity costs. Across the National Electricity Market, contract prices have eased, spot-price volatility has reduced, and increased output from wind, large-scale solar and battery storage has put downward pressure on prices — particularly during the evening peak when expensive gas generation is called on less often.
The ESC sets the VDO using a cost-stack methodology similar in principle to the AER's DMO: it accounts for wholesale energy costs, network (distribution and transmission) charges, environmental scheme costs, and retail operating costs and margin. When wholesale costs fall faster than network costs rise, the net result is a price reduction — which is what Victorian households see for 2026–27.
Victoria's five distribution networks each have different cost structures, which is why the VDO reference price varies from $1,546 in the CitiPower zone to $1,908 in the AusNet Services zone. Networks covering larger, less densely populated regions have higher per-customer costs to recover.
The headline price drop is real — but your electricity bill has two components, and only one of them is falling.
Usage rate ↓ Going down
What you pay per kilowatt-hour of electricity used. This is what the VDO headline figure captures. It's falling.
Daily supply charge ↑ Going up
A fixed daily fee you pay regardless of how much power you use. Network infrastructure costs — which drive supply charges — are mostly increasing in 2026-27.
Network charges — the cost of poles, wires, substations and the transmission network — make up 40–50% of a typical electricity bill. The AER has confirmed these are mostly increasing in 2026-27, driven by transmission cost increases, inflation, and recovery of previously under-recovered revenue.
This has a specific impact on lower-usage households — retirees, singles, households with solar who draw less from the grid. The supply charge is unavoidable. If you use less electricity, the fixed daily charge represents a higher share of your total bill, which means the savings from a lower usage rate are partially offset by a higher fixed cost.
The ESC's VDO methodology similarly reflects network cost pressures — while wholesale savings drove the ~5% reduction, network charges in several VIC zones have increased in the 2026-27 regulatory period.
What this means practically
Victoria has five electricity distribution networks. Your zone determines your network charges — which make up roughly 40–50% of your bill — and your VDO reference price. The difference between the cheapest and most expensive zone is more than $360 per year.
Cheapest zone
Covers inner Melbourne, including the CBD and surrounding inner suburbs. As the most densely populated network, CitiPower spreads its fixed infrastructure costs across the most customers per kilometre of cable — giving it the lowest network charges per customer and the lowest VDO in the state.
South-east Melbourne
Covers south-east Melbourne and the Mornington Peninsula. A mix of dense bayside suburbs and lower-density peninsula areas keeps its network costs — and VDO — close to the CitiPower level.
North-west Melbourne
Covers north-west Melbourne. Jemena is the smallest Victorian network by area but serves a growing suburban population, sitting in the mid-range of the state's VDO prices.
Western VIC & outer-west Melbourne
Covers western Victoria and Melbourne's outer west. Powercor operates the largest network by area in the state, combining dense growth corridors with extensive regional coverage — pushing its per-customer network costs above the Melbourne metro networks.
Most expensive zone
Covers eastern Victoria, including the Yarra Valley, Gippsland and the north-east. AusNet has the most expensive VDO in the state because it maintains a long, dispersed network serving a relatively low-density regional customer base. Longer power lines, more vegetation management, and higher exposure to storms and bushfire risk all add to the cost of delivering electricity — which flows through to higher network charges per customer.
Not sure which zone you're in?
Check your latest electricity bill — your distributor name is listed near the top or under network charges. If you live in inner Melbourne you are most likely in the CitiPower zone; outer-west and regional western Victoria fall under Powercor; and eastern Victoria and the Yarra Valley are served by AusNet Services.
Two Victorian-specific issues are worth understanding before you compare plans: the deregulated solar feed-in tariff, and the absence of a Solar Sharer Offer.
From 1 July 2025, the ESC no longer sets a mandatory minimum feed-in tariff in Victoria. Retailers now set their own rates — and some offers include feed-in rates as low as 0 c/kWh. If you have rooftop solar, don't choose a plan on the feed-in rate alone; compare the combined value of usage rates, supply charge and feed-in tariff against your actual export volume.
The Solar Sharer Offer — free midday electricity for smart-meter households — is part of the AER's DMO 8 determination and applies only in NSW, SE QLD and SA. It is not available in Victoria. Victorian households who want to benefit from cheap midday energy should instead look at time-of-use or solar-friendly market offers, which many Victorian retailers provide.
Renters in Victoria are free to choose their own electricity retailer and should compare plans the same way owner-occupiers do. Because Victoria's retail market is so competitive, the gap between a standing offer and the cheapest market offer is the largest in the country — so engaging with the market is where the real savings are.
The VDO is the maximum a retailer can charge on a standing offer — not the cheapest plan available. Victoria has the most competitive retail electricity market in Australia, with more retailers and more plans than any other state, and market offers can be up to 25% below the VDO — the largest gap nationally.
That means the ~5% VDO reduction, while welcome, is only part of the picture. A household still on a standing offer that switches to a competitive market offer can save substantially more than the headline reduction. Standing offer customers will see the VDO cut applied automatically from 1 July 2026, but they are still paying the regulated ceiling.
Your price will automatically decrease on 1 July 2026 to the new VDO level. But you are still paying the maximum regulated price — switching to a competitive market offer could save you significantly more, with market offers up to 25% below the VDO.
Your rates are not automatically adjusted by the VDO — your retailer sets them independently. After 1 July, the market will have shifted, so compare plans to check whether a better deal is now available. Switching is free and does not interrupt your supply.
Compare Victorian electricity plans before July 1
Market offers in Victoria can be up to 25% below the VDO — the largest gap in the country. Free to compare, no obligation.
Compare VIC PlansWe may earn a commission if you switch through us.
Reference prices in this article are sourced from the Essential Services Commission's Victorian Default Offer 2026–27 determination. The VDO is set by the ESC for Victoria and is separate from the AER's Default Market Offer (DMO), which covers NSW, South East Queensland and South Australia.
Annual reference prices represent the estimated annual cost for a representative residential customer on a flat-rate standing offer in each of Victoria's five distribution zones. The average reduction of approximately 5% for households and 6% for small businesses, and the average saving of around $84 per year, are based on the ESC's published figures.
Per-zone percentage changes and estimated savings shown in the table are approximate, derived from the announced average reduction applied to each zone's reference price. Actual savings vary by zone, individual usage, tariff type and your current plan.
The deregulation of Victoria's minimum solar feed-in tariff from 1 July 2025, and the fact that the Solar Sharer Offer applies only to DMO regions, reflect ESC and AER policy respectively.
EnergyPlans is an independent energy comparison platform. We are not the ESC, not the AER, not a retailer, and not an official government source. This article is our independent analysis of publicly available data. For the official determination, refer to the ESC's published documents.
Use Australia's free comparison service to find a competitive electricity plan for your Victorian address.
Free to compare. We may earn a commission if you switch.