Victorian households will have default offer electricity prices 5 per cent lower than last year.

The Victorian default offer (VDO) prices have been announced on Monday, with the state Essential Services Commission saying the average prices for default offer prices will decrease 5 per cent from July 1.

“The VDO is a safety net -– there may be better rates available,” iSelect spokesperson Sophie Ryan said.

“With market offers often priced below the reference rate, now is a great time for households to use the price reset as a prompt to shop around and see if they can go even further.”

The default offer is the maximum amount power retailers can charge. The 5 per cent lower average kicks in July 1 for people on ongoing plans, and equates to an average $84 annual saving for households, and $241 for small businesses.

About 512,000 Victorian households get default offer prices, including apartments, retirement villages and caravan parks on embedded networks. About 21 per cent of small businesses are also on the default offer - about 62,000 entities.

The Essential Services Commission has set the price decrease because of falling environmental costs and stable wholesale costs.

Victoria has the dirtiest power usage of states in the National Electricity Market.

At 10am on Monday, Victoria was pulling 82 per cent of its power from brown coal, 9 per cent from solar and 7 per cent from wind.

NSW is running on 61 per cent black coal, 30 per cent solar, 5 per cent hydro and 2 per cent wind.

The state’s Essential Services Commission sets the default power prices.

Commission chairman Gerard Brody said consumers should sign up for the default offer through their power provider.

“Victoria’s default electricity prices are set independently of energy retailers, which ensures all Victorian households and small businesses have access to a fair deal,” Mr Brody said.

“You can find a better deal by shopping around, but the default offer provides a simple, fair option to all households and small businesses.”

The default offer for the 2026/27 year is 14 per cent less than the standing price in 2019 when the Labor government introduced the VDO.

Victorian Energy Minister Lily D’Ambrosio said renewables investment was the reason for the price drop.

“Labor is investing in the efficient, renewable energy that Victoria needs to make life cheaper for Victorians.

“Jess Wilson’s Liberals would send power prices skyrocketing by blocking renewable energy investment that will deliver replacement electricity.”