In short:
Victoria has introduced Australia’s first ban on the so-called energy retailer loyalty tax, requiring eligible customers on older, higher-priced energy plans to be moved onto cheaper offers.
Crackdown on Energy Providers
Victorians on older, expensive energy plans began receiving new protections from 1 July under state government rules aimed at reducing the so-called “energy loyalty tax”.
The changes made Victoria the first state to require energy retailers to move eligible customers off long-standing, higher-priced contracts and onto cheaper offers.
The term “energy loyalty tax” refers to customers who sign up to a competitive energy deal but remain on the same contract for years, with prices increasing over time while newer customers are offered lower rates.
Under the new rules, electricity and gas offers that are more than four years old became subject to price caps.
For electricity, eligible customers must now be moved onto a plan priced no higher than the Victorian Default Offer (VDO), while gas customers must be transferred to a plan based on the median market offer.
Energy retailers were given until 30 June 2027 to move affected customers onto the lower-priced plans. Consumers were also able to contact their retailer from 1 July and request to be switched immediately if they were on an eligible loyalty offer.
The Victorian Government estimated between 27,000 and 53,000 customers would benefit, with annual savings of up to $258 per household and total savings of up to $12.2 million.
Penalties For Non-compliance
Retailers that failed to comply with the new requirements could face penalties of up to $244,212 for each breach.
Supporters of the reforms said they would particularly benefit customers who were less likely to regularly compare energy deals, including older Victorians, busy households and people who may not realise they were paying more than necessary.
Consumer advocates have long argued that loyal customers should not pay higher prices simply because they stayed with the same retailer.
However, some industry groups have previously warned that the additional regulation could reduce pricing flexibility, increase compliance costs for retailers and potentially limit the range of discounted offers available to new customers in the future.
The changes were designed to ensure long-term customers were not left paying significantly more than those who regularly switched energy providers, while still allowing competition between retailers for new business.
