Nexa Advisory welcomes the opportunity to contribute to the AER’s Default Market Offer (DMO) 2026-27 Issues Paper – following our engagement on the Department of Climate Change, Energy, the Environment and Water’s Reforms to the Default Market Offer (DMO) Consultation Paper and recent Solar Sharer Offer (SSO) consultation.
Nexa supports the proposed new DMO objective and the intention that the DMO be set at the efficient cost.
In implementing this objective, we highlight that the way network costs are translated into DMO tariffs and maximum annual bills is central to both consumer protection and system efficiency.
We support TOU DMO tariffs – including the recently announced SSO – being aligned with cost-reflective TOU network tariffs. This creates a coherent chain from system costs to network tariffs, to retail tariffs and ultimately to customer price signals. It also enables the SSO and other TOU offers to reflect the underlying economics of a two-way system with abundant daytime solar.
Key recommendations
In implementing the current DMO changes, we recommend that the AER:
- Support development of smarter tariff structures that better reflect the economics of a two-way system with abundant daytime solar
- The AER should align DMO TOU tariffs – including the SSO – directly with DNSP cost-reflective TOU network tariffs to create a consistent chain of price signals from system costs through to customers.
- AER should also work closely with the AEMC and DCCEEW to ensure network tariff reviews/reforms are streamlined and there is no duplication in effort.
- Undertake an independent review of distribution networks and address the capex bias
- The AER must prioritise reforms that improve utilisation and avoid unnecessary network investment, enabling households with and without CER to benefit from lower future network costs. As we have advocated previously, the network capex bias is the underlying root cause of these challenges and as such, an alternative model such as the ‘totex’ model should be reviewed and adopted as a fundamental priority reform.
- The review should assess:
- the role of DNSPs in facilitating the energy transition;
- the ability of DNSPs to adapt their business models to facilitate the integration of CER; and
- whether existing governance arrangements and regulatory oversight ensure value for energy consumers (e.g., whether the existing capital expenditure bias can be addressed through an alternative ‘totex’ model).
Read our submission here: Nexa Advisory submission – AER DMO 2026-27