Millions of Australian households are currently paying an average of $317 more per year on their electricity bills due to a ‘loyalty penalty’ – simply by remaining on outdated or uncompetitive plans. This hidden cost, identified by the Australian Competition and Consumer Commission (ACCC), affects customers who haven’t switched providers or reviewed their plans in over two years. From July 1, 2026, new ‘Better Offer’ rules are coming into effect, requiring energy retailers to proactively inform you of cheaper plans, making it easier than ever to cut these unnecessary costs.
This guide will detail how the loyalty penalty impacts your hip pocket, explain the new ‘Better Offer’ rule, and provide actionable steps to ensure you’re not overpaying for electricity in 2026.
The Cost of Loyalty: Why You’re Paying More
The Australian energy market is designed to be competitive, but this only benefits consumers who actively engage with it. If you haven’t compared electricity plans recently, you’re likely on a ‘standing offer’ or an older ‘market offer’ that no longer provides the best value. Retailers often reserve their most attractive discounts and rates for new customers, leaving long-term, disengaged customers on higher-priced plans.
The ACCC’s latest Electricity Market Inquiry report revealed households on the same electricity plan for more than three years were paying on average $221 more annually than customers on new plans, with the gap in NSW specifically reaching $303. For flat-rate plans older than two years, this ‘loyalty penalty’ can be roughly $317 extra each year.
This ‘loyalty penalty’ is a significant financial hit, especially when combined with the general cost of living pressures. While the Federal Energy Bill Relief Fund ended on December 31, 2025, with no new universal federal credits for 2026, state-specific concessions and the new ‘Better Offer’ rule are crucial tools for managing your energy costs.
Understanding the New ‘Better Offer’ Rule (Effective July 1, 2026)
Recognising the widespread impact of the loyalty penalty, the Australian Energy Market Commission (AEMC) approved a new rule designed to enhance transparency and empower consumers. From July 1, 2026, energy retailers are required to display “better offer” information prominently in bill communications.
This means your electricity bill will soon include a clear message indicating if cheaper plans are available from your current provider, based on your actual usage data. This is a significant improvement, as previously, such information might have been buried or difficult to find.
Key aspects of the ‘Better Offer’ rule:
- Mandatory Disclosure: Retailers must present better offer messages in cover emails, bill summaries, and on the first page of your bill content.
- Personalised Comparison: The comparison must be based on your historical electricity usage, ensuring the suggested alternative is genuinely relevant to your consumption patterns, including solar exports or time-of-use tariffs.
- Hardship Protections: From December 30, 2026, additional protections will ensure hardship customers are no worse off than the retailer’s deemed better offer and receive proactive assistance.
Victoria Leads the Way with a ‘Loyalty Tax’ Ban
Victoria has gone a step further than the national ‘Better Offer’ rule. From July 1, 2026, Victorian regulators have banned the energy retailer ‘loyalty tax’, requiring retailers to switch any customer they are aware of on an old offer (more than four years old) to a lower rate, set at the Victorian Default Offer (VDO). Retailers have until June 30, 2027, to comply, with penalties for non-compliance.
This proactive measure in Victoria ensures that customers who haven’t engaged with the market are automatically moved to a fairer price, providing a safety net against inflated bills.
Default Market Offer (DMO) and Victorian Default Offer (VDO) 2026-27
The Default Market Offer (DMO) and Victorian Default Offer (VDO) serve as crucial benchmarks for electricity prices. These are regulated prices that cap what retailers can charge customers on standing offers and act as a reference for comparing market offers. The 2026-27 DMO/VDO prices, effective from July 1, 2026, show varied outcomes across states, reflecting a general trend of falling wholesale electricity costs but with regional differences in network charges and market dynamics:
| State/Region | DMO/VDO (Residential Flat Rate, Typical Usage) | Change from 2025-26 | Annual Cost (Approx.) | Key Details |
|---|---|---|---|---|
| NSW (Ausgrid) | 33.14c/kWh, $1.66/day supply | -3.4% to -5.0% | $1,875 - $2,515 | Residential flat rate DMO reductions across all three NSW networks. Time-of-use (TOU) customers can see even larger savings, up to $211/year in the Essential Energy zone. |
| SE QLD (Energex) | 27.97c/kWh, $1.92/day supply | -7.2% to -10.7% | $1,988 (4,600 kWh) | Significant decreases for both flat rate and TOU customers. TOU decreases by up to $229/year. |
| South Australia | 41.91c/kWh, $1.80/day supply | +1.4% (Flat Rate) | $2,334 (4,000 kWh) | Only DMO region where flat rate residential prices increased. TOU DMO fell by 1.1% (-$25/year) to $2,276. SA still has Australia’s highest DMO residential prices. |
| Victoria | Varies by network | -5% (Average) | $1,481 - $1,748 | Average residential bills falling by $84/year (5%). The VDO acts as a safety net and reference price for market offers. |
Note: Prices are indicative and vary by distribution network, usage, and specific plan details. Always check current offers for your postcode.
Actionable Steps to Save on Your Electricity Bill in 2026
Don’t wait for your retailer to tell you about a better offer – be proactive and start saving now. The new rules are a helpful nudge, but taking control is the fastest way to reduce your energy costs.
1. Understand Your Current Bill
Before you compare, know what you’re currently paying. Locate your latest electricity bill and identify:
- Your retailer and plan name.
- Your daily supply charge (cents/day).
- Your usage charges (cents/kWh), including different rates for peak, off-peak, or shoulder periods if you’re on a time-of-use tariff.
- Your average daily or quarterly electricity consumption (kWh).
2. Use Government Comparison Websites
These free, independent tools are your best resource for finding the cheapest plans tailored to your usage.
- EnergyMadeEasy (NSW, ACT, QLD, SA, TAS): The Australian Government’s comparison tool lists all generally available plans from every retailer in your area.
- Victorian Energy Compare (VIC): The Victorian Government’s official comparison site for residents in Victoria.
Input your postcode and upload a recent bill (or manually enter usage data) for the most accurate comparison. The process typically takes 10-15 minutes and can reveal hundreds of dollars in potential annual savings.
3. Contact Your Current Retailer (The ‘Better Offer’ Rule in Action)
Once you’ve identified a few competitive plans (either from your current retailer or competitors), call your existing provider. Ask them directly for their best market offer or to match a competitor’s price. Mentioning the “better offer” rule, which mandates them to inform you of better deals, can be a powerful negotiation tool.
4. Consider Switching Retailers
If your current retailer can’t or won’t offer a competitive deal, don’t hesitate to switch. The process is seamless, with no interruption to your power supply.
5. Embrace Smart Meters and Time-of-Use Tariffs
Many of the best market offers, especially with falling wholesale prices, are linked to smart meters and time-of-use (TOU) tariffs. These tariffs charge different rates depending on the time of day, rewarding you for shifting high-energy consumption to off-peak periods.
For more in-depth information on optimising your energy usage with smart meters, read our guide: Smart Meters & ToU Tariffs: Slash Your 2026 Winter Electricity Bill by $229+.
Notably, a new Solar Sharer Offer is available in NSW and SA from July 1, 2026. This opt-in plan offers free electricity for a few hours daily (e.g., 12pm-3pm in SA, 11am-2pm in NSW) up to 24 kWh, even if you don’t have solar panels, provided you have a smart meter. This innovative offer leverages periods of high solar generation in the grid.
6. Explore Energy Efficiency and Rebates
Beyond switching plans, reducing your overall consumption is key to long-term savings. Look into home insulation, efficient appliances, and potentially solar or battery storage. Many state and territory governments offer rebates and concessions for eligible households.
For a comprehensive overview of available support, consult: Navigating Australia’s Energy Bill Relief and Support in 2026: A Comprehensive Guide and for broader home energy upgrades: Electrify Your Home in 2026: Real Costs, Rebates & Savings Up to $15,000+.
Bottom Line
The ‘electricity loyalty penalty’ is a real and quantifiable cost for millions of Australian households, averaging $317 annually for those on older plans. The new ‘Better Offer’ rule, effective from July 1, 2026, represents a significant step towards greater transparency, but it’s not a substitute for proactive engagement. By regularly comparing plans on government websites like EnergyMadeEasy or Victorian Energy Compare, contacting your retailer, and considering energy-efficient upgrades, you can leverage the competitive market to your advantage and stop overpaying for your power in 2026. Don’t let loyalty cost you hundreds of dollars each year; empower yourself with information and make the switch.