Australia’s energy regulator will cap key elements of electricity bills for the first time while introducing incentives to use power when solar generation is flooding the grid, as the Albanese government moves to ease political pressure over soaring household energy costs.
The reforms will be made through the Default Market Offer – the benchmark electricity price set by the Australian Energy Regulator for households and small businesses in NSW, South Australia and southeast Queensland.
The changes will cap individual tariff components such as daily supply charges and peak electricity rates, tightening a system that previously allowed retailers broad flexibility in how tariffs were structured provided the overall annual benchmark price was met.
The regulator had flagged the changes without specifics to the Default Market Offer.
The most eye-catching element of the reforms is the introduction of a new ‘Solar Sharer Offer’ – which will provide households with a daily window of free electricity in the middle of the day when solar power is abundant.
Under the proposal, retailers with more than 1000 customers will be required to make the opt-in tariff available, offering three hours of free electricity during daylight hours – between 11am and 2pm in NSW and southeast Queensland, and from noon to 3pm in South Australia.
The free electricity will be capped at roughly the amount of power used in a day by a five-person household, after which normal regulated tariffs will apply.
The policy is designed to encourage households to run energy-hungry appliances – such as washing machines, dishwashers or electric vehicle chargers – in the middle of the day when solar generation is flooding the grid and wholesale power prices are often at their lowest.
The changes come as electricity costs remain a politically charged issue after households endured sharp increases in power bills following the global energy shock triggered by Russia’s invasion of Ukraine in 2022.
Wholesale electricity prices surged as global gas and coal markets tightened, flowing through to retail power bills across Australia. The spike left a record number of households struggling to pay their electricity bills and forced governments to introduce a range of cost-of-living measures aimed at cushioning the blow for consumers.
The surge in electricity prices also became a significant contributor to Australia’s inflation spike, prompting repeated warnings from policymakers about the role energy costs were playing in pushing up household living expenses.
Against that backdrop, Labor has increasingly sought to point to retailer pricing behaviour as it tries to demonstrate action on energy bills.
Retailers, however, argue thebiggest driver of rising electricity costs is the expense of expanding networks and building new generation needed to support the government’s rapid shift toward renewable energy.
The AER says the latest reforms are designed to stop retailers shifting costs into particular parts of a power bill – such as sharply higher supply charges or expensive peak-time electricity rates – while still technically complying with the overall annual benchmark price.
Before the reforms, the Default Market Offer operated primarily as a cap on the total annual bill rather than the structure of the tariff itself. While the regulator set the benchmark price for a typical customer, retailers could decide how the individual charges – including supply fees and electricity usage rates – were arranged to reach that total.
The new measures form part of a broader redesign of the benchmark price following reforms announced by the federal government in late 2025 aimed at strengthening the Default Market Offer as a consumer safeguard while adapting the electricity system to Australia’s rapidly growing solar generation.
Alongside the tariff limits, the regulator will also publish two benchmark prices for households in each distribution zone for the first time – one based on a flat electricity rate and another based on time-of-use tariffs – giving consumers a clearer way to compare electricity plans as retailers increasingly charge different prices depending on when power is used.
The latest initiatives come as energy policymakers have increasingly focused on the challenge created by Australia’s rooftop solar boom. While solar power has helped push down electricity prices during daylight hours, demand surges in the evening as people return home and solar generation fades, putting pressure on the grid and driving the need for additional generation and network investment.
Shifting more electricity use into the middle of the day could help smooth those peaks and reduce the amount of expensive infrastructure needed to keep the system running.
The Default Market Offer itself is designed as a safety net for customers who do not shop around for better electricity deals, while also acting as the reference price against which retailers advertise discounts on market offers.
Despite its role as the benchmark price, relatively few customers remain on the standing offer, with fewer than 10 per cent of households and about 18 per cent of small businesses using it.
The regulator will release a draft determination next week before finalising the benchmark price in May following consultation with retailers, consumer groups and other stakeholders. The new price will take effect from July 1.
The Australian