If you’ve been with the same electricity retailer for a few years without checking whether there’s a better deal available, there’s a good chance you’ve been quietly paying more than you need to. It’s a trick retailers have used for years: sign customers up on a competitive plan, then slowly jack up the price over time, betting that most people won’t notice or won’t bother switching. Do it patiently enough, and a plan that looked great in year one can quietly become one of the worst on the market by year four or five, all while the customer keeps paying their bill on autopilot.
It’s called the “loyalty tax,” and Victoria has just become the first state in Australia to ban it outright.
What’s actually changing
Victorian Energy Minister Lily D’Ambrosio announced the ban this week, calling out the practice as a “predatory business model: that hits the people who can least afford it: busy families, older Australians, migrants, and anyone else who doesn’t have the time or inclination to shop around every year for a better energy deal.
Here’s how the fix works: From 1 July 2026, VIC is putting a “reasonable price cap” on any retail electricity plan more than four years old. If a retailer knows a customer has been sitting on one of these ageing, overpriced plans, they’ll be legally required to move that customer onto the cheaper Victorian Default Offer rate.
Retailers have a year to sort out the transition, with fines of up to $244,212 per breach if they drag their feet. That’s a meaningful enough penalty that it’s designed to make ignoring the rule more expensive than complying with it.
The government reckons somewhere between 27,000 and 53,000 VIC households will benefit, saving up to $258 a year each, around $12.2 million in savings across the state.
How a plan quietly turns bad
It’s worth understanding the mechanics, because this is exactly why the loyalty tax works so well on retailers’ side of the ledger. Most electricity contracts don’t have a fixed price for their entire life. Retailers can and do adjust rates periodically, and those adjustments compound. A customer who signed up for a genuinely competitive plan in, say, 2022 has likely seen several small increases since then, each easy to miss on a bill that’s mostly numbers and jargon. None of them individually look alarming. Stacked over four years, they can add up to a plan that’s meaningfully worse than what the same retailer is currently offering brand new customers to win their business.
That’s the core unfairness the ban is targeting: existing customers subsidising the discounts used to attract new ones.
Why this happened
The loyalty tax isn’t new. It’s just finally being called out properly. Consumer group Choice raised the alarm with the ACCC back in May 2025, and the numbers were eye-opening: Australians on old “legacy” plans were missing out on an average of $430/year compared to switching to a current offer from the same retailer.
The Australian Energy Market Commission (AEMC), looked at banning the practice nationwide but pulled back last month. It opted for a softer “sunlight test:” retailers just need to tell long-term customers how much extra they’re paying, rather than being forced to fix it. VIC decided that wasn’t good enough and used its own powers over the state’s energy market to go further.
Where Does That Leave the Rest of Australia?
This is the part worth paying attention to if you’re not in Victoria: nothing has actually changed for you yet.
The AEMC’s “sunlight test” approach still applies nationally, so retailers elsewhere in the country will eventually be required to disclose the gap between your old plan and their current offers, but they won’t be required to close that gap for you. It’s on you to read the notice, do the comparison, and initiate a switch. Historically, that’s exactly the step most people skip, which is the whole reason the loyalty tax exists in the first place.
Other states haven’t signalled they’re following Victoria’s lead any time soon. Each state runs its own energy market rules, and a state-based cap like Victoria’s requires the political will to legislate it, something that isn’t guaranteed just because one state has shown it’s workable. So if you’re in New South Wales, Queensland, South Australia, or anywhere else, the responsible assumption is that your retailer is under no obligation to move you off an old plan, no matter how uncompetitive it’s become.
The real lesson here (even if you’re not in VIC)
If you’re outside VIC, this ban doesn’t apply to you yet, and there’s no guarantee your state will follow suit any time soon. Which means the loyalty tax is still very much alive and well for millions of households.
The honest truth is that no regulation is a substitute for not being at the mercy of a retailer’s pricing decisions in the first place. Every dollar you’re not buying from the grid is a dollar a retailer can’t quietly claw back from you over time. That’s the real appeal of solar, and increasingly, a battery on top of it. Once you’re generating and storing your own power, retailer price creep matters a lot less, because there’s simply less of your bill for them to inflate.
In the meantime, whether or not you’re covered by VIC’s new rules, it’s worth doing the 2-minute check most of us keep putting off: look at your last bill, jump online, and see what your retailer (or a competitor) is currently offering new customers. If there’s a gap between that and what you’re paying, you’ve just found your own personal loyalty tax, and unlike Victorians, you’ll have to fix it yourself.
