State becomes first to ban retail energy “loyalty tax,” in bid to save customers hundreds of dollars a year

Victorian regulators have gone where the Australian energy market rule maker has declined to tread, with the state announcing it will become the first in the country to ban the energy retailer “loyalty tax” – an insidious practice that largely affects vulnerable customers.

Victorian energy minister Lily D’Ambrosio said on Thursday that energy retailers in the state will be banned – effective immediately – from quietly ratcheting up the prices charged to long-term customers who originally signed up to much lower prices or a specific offer.

“The ‘energy retailer loyalty tax’ business model is when energy companies lure customers in with low-priced offers. But often over time, these prices are increased by energy retailers hoping you won’t notice,” a statement says.

“It’s a predatory business model that hits some households harder than others.

“Too often, busy working families, older people, migrants, people without the time or ability to check they’re on the best deal are worse off.”

The loyalty tax was officially called out in a May 2025 super complaint made by consumer advocacy group Choice to the Australian Competition and Consumer Commission (ACCC). The complaint alleged consumers were missing out on an average of $430 of savings a year by unknowingly being on a higher-cost version of their retail electricity plan.

An example put forward by Choice is customers receiving ‘Better Offer’ or ‘Best Offer’ messages that refer to a plan with the same name as their existing plan, but with different prices – leading customers to believe they are already on the best plan, and potentially missing out on savings as a result.

Governments and regulators took notice, and a nation-wide ban on the loyalty tax was added to the wish-list of the Australian Energy Market Commission (AEMC), as one of six recommendations in last year’s draft report on energy pricing reforms.

But the push for a ban was marched back in the AEMC’s final report, last month, with the market rule maker recommending subjecting the practice to the sunlight test, instead.

To “shine a light” on retailer behaviour that contributes to negative outcomes for loyal customers, the AEMC has recommended requiring retailers to notify customers who have been on the same plan for four years how much extra they paid compared to a better offer. They would also be required to report that data to the Australian Energy Regulator (AER), which would publish it.

What is made of the AEMC’s final recommendation remains to be seen – it was slammed as a “missed opportunity” by energy consumer advocates – but Victoria, whose retail energy market is regulated separately by the Essential Services Commission (ESC), has decided to forge ahead with a ban.

“We can’t let private energy companies prey on vulnerable people,” D’Ambrosio said in a statement on Thursday. “We’re ending the energy retailer loyalty tax and putting money back into people’s pockets.

“We’re taking on the big energy companies to make bills cheaper and fairer.”

Victoria will do this by introducing what minister D’Ambrosio describes as “reasonable price caps” on retail plans that are more than four years old.

From July 01, 2026, retailers are required to switch any customer they are aware of on an old offer to a lower rate which, for electricity, will be set at the Victorian Default Offer (VDO).

The retailers have until 30 June 2027 to change their customers on these offers over to the lower rate, and those who don’t comply could face penalties of up to $244,212 per breach.

D’Ambrosio says the change expected to save between 27,000 and 53,000 customers up to $258 a year on their energy bills, delivering up to $12.2 million in total savings.

If you would like to join more than 29,000 others and get the latest clean energy news delivered straight to your inbox, for free, please click here to subscribe to our free daily newsletter.

If you wish to support independent media, and accurate information, please consider making a one off donation or becoming a regular supporter of Renew Economy. Please click here. Your support is invaluable.