When Numbers Start Making Decisions · Season Three, “The People the Average Does Not See” · Article 10
1. A comparison price needs an imaginary bill
Electricity plans contain daily supply charges, usage rates, time-of-use periods, controlled loads, discounts and conditions. Consumers cannot compare them by looking at one tariff. Australia’s Default Market Offer therefore provides both a regulated safety net for standing-offer customers and a reference price against which market offers are advertised.
To turn multiple tariffs into one annual amount, the system needs model annual usage. Retailers can then say that an offer is a percentage below or above the reference price for a defined distribution zone and customer type. The Australian Energy Regulator explains that the DMO applies in New South Wales, South Australia and South East Queensland and that the 2026–27 prices took effect on 1 July 2026. AER: The Default Market Offer
The resulting annual figure looks like a bill for a typical household. No actual household necessarily uses electricity in exactly that amount or pattern. A family with electric heating, a solar household, a small apartment and a person relying on medical equipment can rank the same plans differently.
The comparison is standardised, not personalised. Understanding that difference is essential before “20 per cent cheaper” becomes an expectation about one household’s savings.
2. Why a common usage profile is necessary
A plan with a high daily charge and low usage rate may suit a high-use household but cost more for someone who uses little electricity. A plan with cheap midday power and expensive evening power depends on when energy is consumed. Without a common profile, each retailer could advertise using the consumption pattern that makes its own offer look best.
The Electricity Retail Code requires comparison with the reference price so consumers receive a consistent baseline. The Australian Competition and Consumer Commission explains the advertising rules and the role of the percentage comparison. ACCC: About the Electricity Retail Code
Standardisation disciplines marketing. It does not predict an individual bill. The AER determines broadly representative annual usage amounts by region, and the reformed 2026–27 framework also addresses annual comparison prices and tariff caps. AER: DMO 2026–27 final determination
The model household is best understood as a measuring weight placed on every plan. It makes unlike tariff structures comparable under the same assumptions.
3. “Typical” hides a distribution
Annual electricity use varies with household size, dwelling efficiency, climate, gas connections, appliances, work patterns, solar panels and health needs. Even within one distribution zone, the average or representative amount can sit far from many households.
The difference is not random inconvenience. Renters may be unable to improve insulation or install solar. Older people and people with disability may need heating, cooling or equipment for longer periods. Families with young children can have high daytime use. A single annual reference can therefore be less informative for groups with constrained consumption.
Time pattern matters alongside total quantity. Two households can use the same number of kilowatt-hours but incur different bills on a time-of-use tariff. A flat model profile compresses those differences into one result.
The label “typical” should not imply that departures are unusual behaviour. It refers to a regulatory assumption chosen for comparability. Publication should name the exact usage amount, tariff type and zone rather than relying on a reassuring adjective.
4. A percentage discount is conditional on the model
Suppose a market offer is advertised as 15 per cent below the reference price. The statement is calculated using prescribed model annual usage. The household’s actual saving can be larger, smaller or absent depending on its own load, discounts and conditions.
This does not make the claim false. It makes it conditional. Consumer harm arises when the condition is visually or linguistically subordinate to the headline. A standard comparison should be the beginning of shopping, followed by a bill-based calculation.
The ACCC advises consumers to compare plans using their circumstances and pay attention to price, discounts and conditions. ACCC: Electricity prices and plans Energy Made Easy can use bill information and location to produce a more relevant comparison.
The movement from representative to personal evidence is crucial. The reference price makes the market legible; the actual bill tests which offer suits this user. Neither replaces the other.
5. The DMO has two purposes that should not be confused
The DMO is a maximum price for residential and small-business customers on standing offers in covered regions. It protects people who have not selected a competitive market plan. It also serves as the reference price for comparing market offers.
As a safety net, its success concerns what standing-offer customers are charged and whether the regulated tariffs reflect the statutory framework. As a comparison tool, its success concerns whether consumers can understand and act on offers. One annual number is involved in both, but the purposes differ.
The AER’s 2026–27 final release reported the new prices and explained changes across regions and tariff types. AER: Final Default Market Offer 2026–27 The DMO need not be the cheapest market offer, and a percentage below it is not automatically the best plan for every household.
Policy evaluation should keep the two roles visible. A sound cap can coexist with confusing comparisons; clear comparisons can coexist with households unable to switch because of debt, digital access or other barriers.
6. Better comparison requires layering, not one perfect average
No single model can remain simple and represent every household. A useful design has layers.
The first layer is the mandatory reference price, identical across advertisers for the relevant zone and customer class. The second shows transparent assumptions: model annual usage, supply and usage components, tariff type and conditional discounts. The third uses the consumer’s bill or smart-meter data to estimate cost under each offer. The fourth explains non-price conditions, expiry and switching steps.
For vulnerable users, systems should provide assisted comparison and not assume digital confidence. Where energy use is medically necessary or constrained by poor housing, affordability policy should not treat unusually high consumption as a consumer failure.
Results should also be tested. Do advertised rankings match the cheapest plan for actual users across low, medium and high use? Are time-of-use customers able to understand the assumed pattern? Which consumers remain on high-cost offers despite comparison information? Those outcomes reveal who the model average fails to see.
7. A practical framework for model-household comparisons
When an annual comparison uses “typical” consumption, ask:
- What exact annual usage and load pattern are assumed?
- Which zone, meter and tariff type does the reference cover?
- Is the number a regulatory cap, a comparison baseline or a bill prediction?
- Which households are far from the model and why?
- Are discounts conditional, temporary or tied to payment method?
- Can a consumer compare using an actual bill or meter data?
- Are supply and usage charges shown clearly?
- Is the system audited for real savings and distributional accessibility?
These questions do not undermine a common comparator. They make its purpose and limits usable.
Conclusion: the imaginary household should make the market comparable, not define your home
The representative annual bill solves a difficult coordination problem. It prevents every retailer from selecting a flattering usage assumption and allows consumers to orient themselves in a complex market. The DMO also provides a regulated safety net for people on standing offers.
My judgement is that “typical use” is legitimate as a standard testing profile only when the assumptions are prominent and consumers can move easily to their own data. A comparison percentage should be read as performance under the regulatory model, not a promise of personal savings.
The average household is an instrument for comparing plans. It is not the household opening the bill.
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