Business energy deemed and out-of-contract rates explained

What is a deemed business energy contract?

A deemed contract can arise when your business uses gas or electricity without having agreed a contract with the supplier. Moving into premises where energy is already connected is a common example: using the supply does not mean you have inherited the previous occupier’s negotiated deal.

Ofgem explains that a deemed contract may also apply after an existing agreement ends if that agreement does not specify what happens next. Ask the supplier to confirm your business’s contract status rather than relying only on the tariff name.

How are out-of-contract rates different?

Out-of-contract rates apply where your existing agreement sets out the arrangement that follows its end. A rollover or automatic renewal is another possibility, depending on the terms. Check your contract and renewal notice to establish which arrangement applies to each meter.

Citizens Advice describes deemed tariffs as usually among the most expensive. That is a reason to compare options, not a promise that every replacement will be cheaper. Actual costs depend on the supplier, premises, consumption, standing charges and terms available when you ask for a quote.

How to check the rate your business is paying

Start with a recent bill and the supplier’s written contract information. If the position is unclear, ask for confirmation in writing so you can compare offers on the same basis.

• Confirm the company name, supply address and meter reference: MPAN for electricity or MPRN for gas.
• Check the tariff name, unit rate in pence per kWh and daily standing charge.
• Find the contract end date and any renewal or termination notice requirements.
• Ask whether the current arrangement is deemed, out-of-contract or a renewed fixed term.
• Check annual consumption and whether recent bills use actual or estimated readings.

What to do when moving business premises

Identify the existing supplier, record opening meter readings and tell the supplier when your business became responsible for the premises. Keep evidence of the occupancy date and check with your landlord whether energy is supplied under your own contract or through a shared arrangement.

Where possible, arrange a suitable contract before you begin using the supply. If you are already on a deemed contract, ask about replacement offers and switching conditions. Do not assume that a bill addressed to the old occupier settles your business’s responsibility.

Compare the complete cost before agreeing

Use the same annual consumption and start date when comparing the existing arrangement with new offers. The unit rate alone is not the whole bill: standing charges, contract length, taxes and separately billed charges can change the result.

• Compare estimated annual costs, with VAT and other charges treated consistently.
• Ask which charges are fixed and which may change or be passed through separately.
• Check any broker fees or commission and how these are included in the offer.
• Read the start date, term, exit conditions and what follows the contract’s end.
• Check whether the agreement fits your lease, planned move or business closure dates.

Can a business switch away from deemed rates?

Citizens Advice says businesses on deemed tariffs can usually switch. Confirm the process with your supplier and prospective supplier, including any account or meter issues that could delay a transfer. An unpaid balance still needs attention even when you change supplier.

If the bill or contract status is disputed, raise it with the supplier and keep written records. Comparing alternatives and resolving a billing complaint are separate steps; do not agree a new contract without understanding its terms.

Frequently asked questions