Written by Abdullah Shoaib, Founder & CEO of Energy Solutions | Last updated: August 3, 2026
A deemed rate is what a supplier charges you when you’re using energy with no signed contract behind it.
Usually that means you’ve moved into a site and started drawing power before anything was agreed upon, or your old contract ran out and nobody replaced it.
I’ll say this plainly. I’ve never seen a deemed rate that was good value. It exists to protect the supplier, not you.
The fix is straightforward: find out your current tariff, get your meter details together, and get a new contract signed. The longer that takes, the more it costs you.
What Is a Deemed Rate?
A deemed rate is the supplier’s fallback tariff for energy used without a contract in place. Ofgem sets the rules suppliers have to follow when they apply one, but not the price itself.
Each supplier sets that independently, and it moves by region, meter type, and fuel.
In my experience, businesses land on a deemed rate for one of a few reasons.
They move into the premises and start using energy before a contract is agreed upon. The previous occupier leaves, and the supply just keeps running on default terms.
A switch or account setup didn’t get finished in time. Or the supplier is providing default supply, including some situations of last resort.
Strip away the jargon and it’s this: the supplier is keeping the site powered, but there’s no deal behind it. That’s expensive by design.
What Is an Out-of-Contract Rate?
An out-of-contract rate is what you’re charged once an existing contract has ended and nothing has replaced it. The difference from a deemed rate is really about timing.
Deemed usually means there was never a contract for that supply period at all. Out-of-contract means there was one, and it lapsed.
Suppliers still have to bill for the energy going through the meter, so they move the account onto a variable or default tariff until you sign something new.
The mechanics are slightly different, but the outcome is the same. You pay more than you should, for as long as you let it run.
Deemed vs Out-of-Contract vs Rollover vs Fixed
| Contract Type | Electricity Unit Rate | Gas Unit Rate | Standing Charge | Typical Position |
| Fixed Contract (new deal) | 24 to 29p/kWh | 7 to 10p/kWh | Around 30 to 70p/day | Usually cheapest and predictable |
| Deemed Rate | 35 to 45p/kWh | 11 to 14p/kWh | Often £2 to £3+/day | Very expensive, meant to be temporary |
| Out-of-Contract Rate | Around 40p/kWh | Around 12p/kWh | Electricity around 254p/day, gas around 338p/day | High cost after contract expiry |
| Rollover / Evergreen | Usually above fixed rates | Usually above fixed rates | Depends on supplier | Supplier continues supply automatically |
Rates shown are July 2026 market examples for illustration and will move with the wholesale market. Confirm current figures before quoting a specific number to a client.
If you only look at one table on this page, make it this one. It tells you where you sit and roughly what that’s costing you, without needing a quote first.
Why These Rates Cost More
The mechanism
There’s no commitment behind a deemed or out-of-contract supply, so the supplier prices in the risk. On a fixed contract, they know your usage and can plan around it.
On default supply, they’re covering their exposure with no guarantee you’ll stay, and you pay for that uncertainty, not for the electricity itself.
What that looks like in practice
Take a business using 20,000 kWh of electricity and 10,000 kWh of gas a year, a fairly typical small shop or office.
| Contract Type | Electricity Cost | Gas Cost | Approx. Total Energy Cost |
| Fixed Contract | £5,000 to £5,800 | £700 to £1,000 | £5,700 to £6,800/year |
| Deemed / Out-of-Contract | £8,000 to £9,000 | £1,100 to £1,400 | £9,100 to £10,400/year |
| Potential Difference | £3,000 to £4,000+ extra/year |
That gap is real money for almost any small business, a shop, a salon, a restaurant, an office. Scale usage up to 50,000 kWh and the difference stops being an annoyance and starts affecting margin.
What comparable fixed deals look like
Here’s roughly where negotiated fixed rates were sitting for SME scale usage in the same period, so you’ve got something to compare against.
| Supplier | Example Electricity Fixed Rate | Example Gas Fixed Rate |
| EDF Business | ~25.8p/kWh | ~6.4p/kWh |
| E.ON Next Business | ~25.4p/kWh | ~6.3p/kWh |
| British Gas Business | ~26.9p/kWh | ~6.7p/kWh |
| ScottishPower Business | ~23.5 to 27.5p/kWh | Market dependent |
Figures are indicative market examples. Always confirm live rates for a specific meter and postcode before quoting them to a client.
The takeaway I’d give any business owner: if you’re on a deemed or out-of-contract rate, you could easily be paying 10 to 15p/kWh more on electricity and 3 to 6p/kWh more on gas than a properly negotiated deal.
On 20,000 to 50,000 kWh a year, that’s the line between a manageable bill and one that actually hurts.
Ofgem Protections and Their Limits
Ofgem’s deemed contract rules apply to non-domestic suppliers across Great Britain. Suppliers have to operate within their licence conditions and make deemed terms clear to customers.
What Ofgem doesn’t do is cap the price itself, so a supplier can be fully compliant and you can still be paying well above a competitive fixed deal.
Worth understanding clearly: the process is regulated, the price isn’t. That protection is about fairness and transparency, not about keeping your bill down. Don’t mistake Ofgem compliant for reasonably priced. They’re not the same thing.
How to Check Your Bill
Pull up your latest statement and look for these five things.
The words deemed, out of contract, default, or variable. A unit rate that looks high for your usage. A standing charge that seems unusually large.
A contract end date that’s already passed, or missing. And a tariff name that doesn’t match the deal you thought you had.
If the bill doesn’t make it obvious, check the supplier’s online portal or just call and ask directly for your tariff type, supply status, and contract end date.
If you can’t match what’s on the bill to a signed agreement, assume you’re on default terms until someone proves otherwise.
Find Your Supplier and Meter Details
You’ll need your MPAN for electricity or MPRN for gas to get an accurate quote and confirm the right supply. If you don’t know your supplier, check your latest bill, the site handover paperwork, or your tenancy pack, or just ask the landlord or managing agent.
If you’ve just moved into a site, confirm the meter serial number, your MPAN or MPRN, the current supplier, the contract start or occupancy date, and any notice already given by the previous occupier.
One mistake I see constantly: businesses get one of these details wrong, usually the meter reference, and that alone delays the switch by weeks. Every week on default rates is money you don’t get back.
If Your Supplier Goes Out of Business
If your supplier stops trading, Ofgem’s Supplier of Last Resort process keeps the lights on. Your site doesn’t lose supply. What usually happens is you’re placed on temporary default or transitional pricing until a new contract is arranged with whichever supplier Ofgem appoints.
The practical rule I’d give here: your supply is safe, but your price isn’t. Confirm your interim status, find out who the appointed supplier is, and get a replacement contract in place quickly.
Waiting it out and hoping it sorts itself isn’t a strategy. It’s just an expensive default.
How to Switch Off a Deemed Rate
Confirm your current tariff type. Ask the supplier directly whether you’re on deemed, out-of-contract, rollover, or fixed terms.
Gather your MPAN/MPRN and annual consumption. Quotes are only as accurate as these details.
Compare new contracts. Get more than one quote, and weigh the standing charge alongside the unit rate, not just one of them.
Check for notice periods. If you’re on a rollover or continuing term, missing the notice window will delay your switch.
Sign the new contract and confirm the switch date. Line it up with your tenancy or occupancy timeline.
Verify your first bill after the switch. Make sure the old default tariff has actually ended and the new rate has started.
The goal isn’t just a cheaper number on a quote. It’s making sure the account is genuinely off default status. I’ve seen businesses sign a new deal and still get billed at the old rate for a cycle or two because nobody checked.
What We See Most Often
Businesses rarely end up on a deemed rate by choice. What actually happens, almost every time, is that nobody’s watching the contract timeline closely enough.
A lease handover, a contract expiry, or a move-in date slips past unnoticed.
The patterns that come up again and again:
- Renewal notices missed by a few weeks
- Premises occupied before the supply arrangement is finalised
- An assumption that the landlord, agent, or supplier has already sorted it
- Comparing only the unit rate and overlooking the standing charge
- Multi-site businesses managing one meter correctly and missing another
These are operational misses, not pricing mistakes. That’s exactly why this is a process problem as much as a cost problem. Fix the process and the pricing sorts itself out.
Mistakes That Keep Businesses Stuck
- Assuming the supplier will automatically move you onto a fair rate
- Ignoring the end date because the current bill still seems fine
- Checking electricity but forgetting gas, or the other way round
- Missing the notice window on a rollover arrangement
- Requesting quotes before confirming the correct meter and supplier details
Avoid these and you’ll usually save a meaningful amount within a single billing cycle, not months down the line.
How We’re Paid
I’d rather be upfront about this than have you wonder. If commission is earned as part of arranging a contract, that’s disclosed clearly.
Energy decisions are trust sensitive, and you should always know who’s advising you, what their interest is, and whether that shapes the recommendation you’re getting.
Your Next Step
If you think you might be on a deemed or out-of-contract rate, start by checking your bill and contract dates, then compare that against a current fixed quote.
If you’d rather have us take a look, send over your bill, tariff name, and meter details and we’ll tell you plainly whether you’re overpaying, and what to do about it.
FAQs
What is a deemed rate for business energy?
A deemed rate is the supplier’s default tariff when a business uses energy without an agreed contract in place, most often after a move into new premises, or when supply starts before a contract is signed.
What’s the difference between deemed and out-of-contract rates?
Deemed rates usually apply when there was no active contract for the supply period at all. Out-of-contract rates apply when an existing contract has ended and the business hasn’t renewed or switched.
Why are deemed rates so much more expensive?
Because the supplier is providing energy without a negotiated commitment. More risk, less certainty, and no competitive discounting behind the price.
Can I switch immediately if I’m on a deemed rate?
Usually, yes. Deemed rates aren’t tied to a fixed term, so a new contract can typically be arranged quickly once the correct supply details are confirmed.
What happens to my rate if my supplier stops trading?
Ofgem’s Supplier of Last Resort process keeps the supply running, but your account may sit on temporary default or transitional pricing until a new arrangement is in place.
What should I check first on a backdated bill?
The tariff name, the unit rate, the standing charge, and the date the contract ended or the default rate began. Those four details usually explain why the bill changed.
Do deemed rates apply the moment I move into new premises?
They can apply very quickly if you start using energy before agreeing a contract, which is why checking supply status on day one matters.
Is using a broker free?
Not always. Some brokers are paid by commission, and that should be disclosed clearly so you understand how the advice is funded.
How long does it take to switch off a deemed rate?
It depends on the supplier and how quickly the new contract is signed. In straightforward cases, once supply details are verified, it can move fast.
Can a landlord or letting agent be responsible for a deemed rate?
They may be involved in the handover, but the business occupying the premises is usually the one responsible for making sure the supply is properly contracted. Always confirm who holds the account and who has authority to switch.
Final Takeaway
A deemed rate isn’t a normal tariff. It’s a default billing state that happens because a contract was missed, ended, or never put in place.
The fastest way out is the same every time: confirm your tariff type, verify your meter and supplier details, and get onto a negotiated contract as soon as you can. Every week you wait is a week paying the premium.
