Hundreds of thousands of Victorian families will have about $100 knocked off their annual electricity bills as the state braces for gas shortages.
About 340,000 households on the state's default offer will pay an average annual bill of about $1655 from July 1, representing a six per cent cut from 2023/24, the Essential Services Commission confirmed on Thursday.
Further, 58,000 small businesses will pay an average $3530 bill across next financial year, a saving of $260, and 180,000 customers on embedded networks will pay no more than the recommended price.
The independent regulator is responsible for setting the Victorian default offer, which is the price retailers can charge customers on their standard electricity plans.
Energy retailers are still obliged to inform customers of better offers every three months.
The reduced default offer reflects a lower expected cost of wholesale electricity, the commission's chief executive Sarah Sheppard said.
"We've seen an increase over the past couple of years, primarily due to the events in Ukraine and other international shocks, but the prices are now coming down," she told reporters on Thursday.
"More renewables have come into the system and that is putting downward pressure on the wholesale prices."
Compared with the 2023/24 offer, wholesale electricity costs have fallen $143 and network costs have increased $44 on average for domestic customers.
The default offer price fall would have been steeper if not for rising network tariffs approved by the Australian Energy Regulator earlier in May.
Ms Sheppard said inflation had pushed up the costs of poles and wires used to distribute and transmit electricity.
The Victorian Council of Social Services said default offer would do little to ease cost pressures.
"This modest reduction will save households about $2 a week and be quickly obliterated by rising expenses like food, rent and petrol," chief executive Juanita Pope said.
Energy Minister Lily D'Ambrosio said Victoria had fared better than other states, with smaller default offer reductions in NSW and South Australia and a 4.2 per cent rise for Queensland customers.
But Opposition Leader John Pesutto noted the six per cent fall for residential customers followed rises of five per cent and 25 per cent in the past two years.
"(They're) small measures that don't really address the cost-of-living pressures facing Victorian households and businesses," he said.
Ms D'Ambrosio faced a grilling at a state budget estimates hearing on Thursday over an official warning of looming gas shortages.
A briefing note from department officials in July 2023, obtained by the opposition under freedom of information and seen by AAP, cautioned homes and businesses could face gas shortfalls from as early as 2026.
"Electrification in Victoria cannot occur quickly enough to address these shortfalls," the note said.
"New gas supply will be needed to maintain reliable supply to gas consumers and to support increasing utilisation of gas power generation which will provide critical firming services as coal generation exists the NEM (national energy market)."
Ms D'Ambrosio said she agreed with the department's advice and pointed out Victoria's diminishing gas reserves were acknowledged in the state government's updated gas substitution road map.
"At no point has anyone in government ever asserted that electrification was the solver, the single solution, to gas supply shortfalls," she told the committee.
Gas connections to new homes and government buildings were banned in Victoria from January 2024.
In 2021, the Victorian government lifted a ban on companies exploring for untapped onshore gas reserves, but Ms D'Ambrosio said "none have come forward" to apply for a licence.
