The Ultimate Guide to Deemed Contract Energy Rates

Business energy contracts and rates can be complex, so this guide aims to provide everything you need to know about deemed contracts for energy and how businesses can successfully navigate them to ensure that they aren’t paying over the odds on energy bills.

Jump to:

• Deemed contract meaning

• What is a deemed energy tariff?

• Are deemed energy contracts more expensive than fixed business energy agreements?

• How to know if your business is on a deemed energy tariff

• Are deemed contracts enforceable?

• Can a business switch suppliers if on a deemed energy contract?

• Can you have different rates for ‘time of use’ on a business deemed energy contract?

• How to get out of deemed contract energy rates

Deemed Contract Meaning

A deemed contract is a binding agreement between a supplier and their customer about the services being provided. It only applies when both parties haven’t agreed upon another contract.

In terms of business energy, a deemed contract is likely to automatically be put in place when a business moves to a new premises where the previous occupant's supplier, or a supplier chosen by the developer if it is a brand-new building, is still providing energy to the property.

In other cases, you can form a deemed contract when an existing agreement with your energy provider comes to an end without another contract being explicitly agreed. In this instance, your business will automatically move into a deemed contract for energy. You might encounter this approach referred to as an ‘out-of-contract rate’ rather than a deemed contract rate, but they are the same thing.

Essentially, deemed contracts are rolling contracts with the energy provider that run month-to-month (28 days) but are usually on different terms and rates to the previous fixed agreement if that has now come to an end.

What is a Deemed Energy Tariff?

Deemed energy tariffs are the rate at which a supplier charges your business for the electricity and/or gas that they use when on a deemed energy contract.

As part of the tariff, there will usually be a standing charge, which is paid for each day that you receive your energy supply, regardless of how much or when you use it. There will also be a unit rate with a deemed energy tariff, with a separate one for electricity and gas (if supplied), and your business will have to pay for the units that they use.

Are Deemed Energy Contracts More Expensive Than Fixed Business Energy Agreements?

In most cases, deemed energy contracts will be considerably more expensive than the best business energy deals on the market at the time, as the provider will generally automatically charge their highest rate for deemed contracts. It’s estimated that deemed energy contracts are usually approximately 80% more expensive to the business than the cheapest available tariff.

This can be a real problem for businesses if they are not aware of being on a deemed energy contract, and they are then hit with an unexpectedly large energy bill.

Some measures have been put in place by Ofgem, the energy regulator, to limit the charges for gas or electricity under a deemed energy contract. However, these measures are not specific or have an actual cap, so businesses can pay more when on a deemed energy contract than they would on another agreement.

How to Know if Your Business is on a Deemed Energy Tariff

If your business has recently moved to a new premises and you haven’t made explicit arrangements with your energy provider for that building, it is likely that you will be on a deemed tariff automatically.

If you have come to the end of a fixed agreement with your business energy provider and haven’t negotiated a new contract with them, the chances are that you will also move onto a deemed energy contract. If your energy bill unexpectedly increases significantly, this can also be a sign that you have moved to a deemed contract energy rate.

Your energy supplier is required to contact you and provide information about the type of energy contract you are on. They should also include information about other available tariffs. If you haven’t received this information, you should contact your energy provider and request it.

Are Deemed Contracts Enforceable?

Deemed energy contracts are legally enforceable as long as your energy supplier has made reasonable efforts to tell you about the contract you are currently on. They should supply you with a copy of the contract and include a breakdown of the various charges and fees that apply.

If you don’t believe that your energy supplier has:

• Supplied you with a copy of your full contract when you request it, or

• Contacted you before the end of your previous contract to tell you about your options

You may be able to get the contract terminated, but you will usually still be liable for paying for the energy you have used since being on the deemed contract.

Can a Business Switch Suppliers if on a Deemed Energy Contract?

The good news for businesses that end up on a deemed energy contract is that you are not tied into a long agreement at these high rates. You can switch your business energy at any time to a new provider without penalty, which means you have the freedom to choose a provider and tariff that can provide your energy for less.

It might be the case that your current provider has a tariff available that will offer you a good deal, or you may be better off switching to another supplier entirely.

You can compare business energy prices now to find the best available deal.

Can you Have Different Rates for ‘Time of Use’ on a Business Deemed Energy Contract?

Many businesses benefit from different rates for their electricity under a fixed agreement with their provider, depending on how the business uses energy during peak and non-peak times of the day and night.

Whether this carries over to a deemed energy contract once the fixed agreement has come to an end, with no new contract negotiated, will depend on the provider and their policy on this specific element of their service. Some suppliers may just charge a flat rate for electricity use at any time on a deemed contract, which can mean that the cost of the energy can increase significantly if the business used to take advantage of cheaper rates at night.

How to get out of Deemed Contract Energy Rates

The easiest way to get out of a deemed energy contract and stop paying higher rates for your business gas and/or electricity is to switch to a new agreement.

There is no exit fee to leave a deemed energy contract and move to a different tariff, and it’s a straightforward process. For every month that a business on a deemed energy contract doesn’t take action, the higher energy costs continue.

By switching to a new business energy deal, you can start to make significant savings on energy costs as soon as the switch goes through.

At BusinessComparison, our team has in-depth market knowledge and can help find the best available business energy deal for you.

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