Energy Tips
Loyalty Tax: What Is It and How Is It Affecting My Energy Bill?
Loyalty isn’t always rewarded. See how staying with the same plan can affect your electricity bill.
- What Answers You’ll Get On This Page
Important Points
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If you’ve been with the same energy provider for a few years without checking your rates, there’s a good chance you’re paying more than you should.
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Regulators like the AEMC and state-based bodies have introduced rules that require retailers to notify customers of better available offers. Still, these don’t guarantee you’re always on the best deal.
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Comparing plans and switching to a better deal is one way to combat the loyalty tax.
In this guide, we’ll discuss in detail how the loyalty tax works, why regulators are stepping in, and what you can do right now to avoid paying more than your fair share.
What is the Loyalty Tax? Why Staying Means Paying More
The loyalty tax refers to the hidden premium many Aussies pay simply for staying with the same electricity provider over time.
While new customers are often enticed with one-off discounts and low introductory rates, long-term customers are frequently left on outdated, more expensive plans once those deals expire or their benefit period ends. This price increase means loyal customers can end up paying significantly more than those who regularly shop around and compare the market.
It’s not just industry jargon either; the loyalty tax is a real and growing problem. According to the Australian Competition and Consumer Commission (ACCC), which monitors fair trading and consumer protections, energy retailers routinely roll existing customers onto higher rates (such as the standing or default market offer) once their initial contract or discount period ends.
In a recent report, the ACCC found that more than 80% of households in the National Electricity Market, which covers NSW, Victoria, Queensland, South Australia, and Tasmania, could save money just by switching energy plans¹. That means millions of Australians may be overpaying on their bills, not because of household changes, but because they’ve stayed loyal to the same provider while better deals are active.
Did you know?
Staying loyal to an energy provider might seem easier, but it could be costing you hundreds of dollars every year.
How Much Could You Really Save?
The graph below highlights a growing issue in Australia’s energy market: the longer you stay on the same plan, the more you’re likely to pay.
Source: ACCC analysis of retailer pricing data, 2024.
According to the ACCC’s Inquiry into the National Electricity Market, December 2024, over 3.7 million Australian households are on flat-rate energy offers that are at least a year old, with 2.1 million of those on plans that are two years old or more.
Why does that matter?
Because customers on plans older than two years are paying, on average, 16.9% more per year, that’s around $317, compared to those on newer market offers¹. Even those on one-year-old plans are missing out on better rates.
The trend is clear: the older your plan, the greater the potential for a higher “loyalty penalty.”
In fact, 59% of customers on flat-rate offers that are two or more years old were found to be paying at or above the regulated Default Market Offer (DMO), compared to just 10% of customers on newer, better deals.
These figures exclude any rebates or concessions, meaning they reflect the true market price gap caused by not switching your energy plan.
This pattern isn’t just limited to flat-rate plans either. The ACCC also observed similar overpayment trends for customers on older time-of-use and demand-based tariffs, meaning inaction is costly no matter what type of pricing structure you’re on.
So, if there’s one thing to take away from this:
It’s that if you haven’t reviewed your plan in over a year, you could be overpaying by hundreds annually, money that could be going toward groceries, household bills, or savings.
Regularly comparing offers isn’t just a financially strategic move; it’s quickly becoming a necessity for keeping energy costs under control, especially with the cost-of-living increases going on around the nation.
This leads us to our next point.
2Cost of Living Crisis: The Loyalty Tax Goes Beyond Just Energy
From groceries and fuel to rent and healthcare, the loyalty tax is quietly adding to the everyday pressures that Aussies are facing. When energy bills creep up just because you stayed loyal to your provider, it’s not just annoying; it’s costing you real money that could otherwise go toward savings, payments, and other necessary expenses.
According to a report in the Australian Energy Regulator (AER), the average household energy bill rose by around 10% in recent years, and these increases are happening alongside the loyalty tax premium⁵.
For families already dealing with rising living expenses, this hidden cost can feel like a silent tax, one that essentially ‘chips away’ at their financial security bit by bit.
Case in point? Stay vigilant, compare plans regularly, and switch to better deals before the loyalty tax becomes a bigger financial burden than what you can afford.
Here’s how being on a bad rate can affect you:
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More bills, less breathing room: Rising energy costs combined with other living expenses can force tough trade-offs on families, like less discretionary spending, reduced savings, or even having to cut back on heating or cooling.
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Risk of bill shock: Without checking your plan, you could be caught off guard by sudden spikes during peak seasons.
Why Acting Now Matters
Energy prices have jumped as much as 20-25% in the past year, depending on your location and provider³. Yet many loyal customers haven’t received the most recent discounts or market-based savings. By not reviewing your plan, you’re letting rising prices eat into your budget.
A switch today ensures you benefit from current rates, not outdated pricing. During cost-of-living pressure, this proactive choice delivers peace of mind and meaningful financial relief.
One of the simplest ways to combat the loyalty tax is by simply comparing plans and switching providers. Loyalty might feel like the safe option, but with rates constantly fluctuating, it can cost you hundreds each year.
4What Are Regulators Doing to Protect Consumers?
Bill shock is hitting the nation hard, and while the AEMC has started introducing rules to protect you (like mandatory better-offer alerts from retailers), that’s not going to help if your next bill is already on the way.
You need to take control now.
Here’s what’s changing and what you still need to do:
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Limiting annual price increases: retailers will only be able to raise rates once per year to help households better budget and avoid multiple mid-year hikes.
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Preventing post-offer loyalty hikes: customers whose promotional plan expires will default to a rate no higher than the standing offer, curbing excessive “loyalty tax” penalties.
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Restricting unfair fees: including high late payment fines, and helping customers in hardship find the cheapest plan.
These proposals represent a long-overdue shift, giving consumers more transparency and guardrails in a sense.
But they might not fully solve the loyalty penalty problem.
Retailers can still offer new customer discounts and delay raises until July each year. Marginalised customers, renters, those without internet access, and the elderly could still miss out on better deals unless they’re actively shopping around.
So yes, the AEMC’s reforms offer welcome improvements, but they shouldn’t become your only line of defence. Staying proactive remains your best insurance against overpaying on energy bills.
Bonus tips
EM TIP: Set a reminder to review your plan 3-4 weeks before renewal or when your plan expires. Even just 30 minutes of comparison shopping can lead to major savings. Victorian Energy Minister Lily D’Ambrosio noted households saved around $330/year just by shopping around⁶.
Author
Benjamin TomBenjamin is a utility specialist passionate about creating informative content about the energy, internet, and solar markets. With extensive experience in the telecommunications industry, Benjamin drives our unique blog posts, articles, and reviews. He is focused on breaking down the technical jargon so our readers can better understand the telco market and industry. Whether he is comparing the latest internet deals or creating unique guides, Benjamin takes great pride in creating helpful, easy-to-read content.
Sources:
¹Australian Competition and Consumer Commission (ACCC) – Inquiry into the National Electricity Market: December 2024 Report, https://www.accc.gov.au/publications/national-electricity-market-inquiry-december-2024
²Australian Government – Energy Made Easy, https://www.energymadeeasy.gov.au & Victorian Energy Compare, https://compare.energy.vic.gov.au
³Australian Energy Regulator (AER) – Default Market Offer 2024–25 Final Determination, https://www.aer.gov.au
⁴Essential Services Commission Victoria – Proposed changes to help consumers on legacy offers, https://www.esc.vic.gov.au/electricity-and-gas/information-retailers/legacy-retail-offers
⁶Victorian Government, Department of Environment, Land, Water and Planning. Energy Plan Comparison and Savings. https://www.energy.vic.gov.au/energy-consumers/energy-plans-and-prices
