MELBOURNE, VIC – Victorian households are set to benefit from significant new protections, with the state government implementing a ban on the controversial ‘energy retailer loyalty tax’ from 1 July 2026. This landmark policy makes Victoria the first Australian state to actively compel energy retailers to move customers off expensive, long-standing contracts and onto fairer, cheaper offers.
The reforms, announced by the Victorian government and the Essential Services Commission (ESC), target a predatory business model where energy companies lure new customers with competitive rates but gradually increase prices for existing, often disengaged, customers. This practice, dubbed the ‘loyalty tax’, disproportionately affects vulnerable consumers, including busy families, older residents, and those lacking the time or resources to regularly compare plans.
“We can’t let private energy companies prey on vulnerable people. We’re ending the energy retailer loyalty tax and putting money back into people’s pockets.” – Victorian Minister for Energy and Resources Lily D’Ambrosio.
Up to $258 Annual Savings for Tens of Thousands
The Victorian Government estimates that between 27,000 and 53,000 customers will benefit directly from this change, with potential annual savings of up to $258 per household. This translates to a collective saving of up to $12.2 million across the state. For electricity customers, this means being switched to a plan priced no higher than the Victorian Default Offer (VDO), which is the lowest default market offer in the country for 2026-27. Gas customers will be moved to a plan based on the median market offer.
Energy retailers have until 30 June 2027 to identify and transition affected customers to these lower-priced plans. However, customers who believe they are on an eligible loyalty offer can contact their retailer from 1 July 2026 and request an immediate switch. Non-compliant retailers face substantial penalties of up to $244,212 per breach.
Broader Consumer Protections Also in Effect
Beyond the ‘loyalty tax’ ban, a suite of new consumer protections under the ESC’s Energy Retail Code of Practice also commenced on 1 July 2026, with further changes slated for 1 October 2026. These reforms aim to create a fairer and more transparent energy market for all Victorians.
Key changes from 1 July 2026 include:
- Reasonable Pricing for Older Contracts: Retailers must proactively ensure customers on electricity or gas plans older than four years are paying a reasonable price. If not, the retailer must lower the tariff or switch the customer to a cheaper plan.
- Concession Eligibility: Retailers are now required to proactively help eligible customers access government energy concessions and take all reasonable steps to ensure they receive any entitlements.
- Payment Method Flexibility: Retailers can no longer mandate a specific payment method, such as direct debit, to access an energy plan. This ensures all customers can access the best available offers regardless of their preferred payment option.
Further protections coming into effect from 1 October 2026 will specifically assist customers experiencing payment difficulty:
- Automatic Best Offer Switch: Retailers must automatically switch eligible customers experiencing payment difficulty (or those in arrears for three months with debts over $1,000) to their cheapest available plan. Customers will retain the option to opt-out.
- Increased Disconnection Threshold: The minimum debt owing before a customer can be disconnected will increase from $300 to $1,000.
These reforms build upon existing measures, such as the annual resetting of the Victorian Default Offer (VDO) by the ESC, which acts as a safety net and a reference price for comparing market offers. The VDO for 2026-27 itself saw an average 5% ($84) reduction for residential customers and a 6% ($241) reduction for small businesses, effective 1 July 2026.
What This Means for Your Energy Bill
For many Victorians, these changes represent a tangible opportunity to reduce electricity and gas expenses without having to actively shop around. The onus is now on retailers to ensure their long-term customers are not being penalised for their loyalty.
Customers are encouraged to review their latest energy bills and, if they suspect they are on an older, more expensive plan, to contact their retailer directly. While the VDO provides a reasonable benchmark, more competitive market offers are often available.
For a broader understanding of how to manage your energy costs, exploring tools like smart meters can be beneficial. Unlock $800+ Savings: Your Smart Meter Guide for Australia 2026 Additionally, understanding available support mechanisms is crucial. Navigating Australia’s Energy Bill Relief and Support in 2026: A Comprehensive Guide
These new rules underscore a clear policy direction towards greater consumer protection and fairness within Victoria’s energy market.
| Policy Change | Effective Date | Estimated Annual Savings (Households) | Affected Customers (Estimate) |
|---|---|---|---|
| ‘Loyalty Tax’ Ban | 1 July 2026 | Up to $258 | 27,000 - 53,000 |
| VDO Price Reduction (Average) | 1 July 2026 | $84 | 512,000 |
| Automatic Switch for Hardship Customers | 1 October 2026 | Varies (to cheapest plan) | Eligible hardship customers |
Note: The VDO price reduction is a separate, broader price change, while the ‘loyalty tax’ ban specifically targets customers on older, high-priced plans.