Business Energy Out-of-Contract Rates Explained

Out-of-contract rates are the prices a business energy supplier charges once your fixed contract has ended and you have not agreed a new deal or moved supplier. They are usually much higher than the rate you were paying before, because they are a default that suppliers are free to set without you having negotiated anything. If your fixed term has expired and nothing else has been arranged, there is a good chance you are paying more than you need to.

These rates are sometimes called deemed rates, though there is a technical difference. Out-of-contract rates apply when your fixed term ends and you stay with the same supplier without signing a new contract. Deemed rates apply when you occupy a premises and start using energy without ever having a contract in place, such as after taking over a new lease. Both tend to be expensive, and both are worth getting off as soon as you can.

Why suppliers set these rates high

A fixed business contract lets a supplier buy energy in advance to match your expected usage. When you fall out of contract, that certainty disappears. The supplier no longer knows how long you will stay or how much you will use, so it prices for that risk by charging more. There is no regulatory cap that forces these rates down to a cheap level for most businesses, so they sit well above what a negotiated fixed deal would cost.

This is one of the main ways business energy differs from a domestic supply. At home, if your tariff ends you usually roll onto a standard variable tariff that is protected by the energy price cap. Business customers have no equivalent automatic cheap default. There is also no cooling off period on most business contracts, so once you sign, you are generally committed for the agreed term.

How to tell if you are on them

Check your most recent bill and look for the contract end date or the tariff name. Signs you may be on out-of-contract or deemed rates include:

• A tariff described as out of contract, deemed, or variable rather than a named fixed product.
• A unit rate or standing charge that has jumped compared with your previous bills.
• No fixed end date shown, or an end date that has already passed.
• A note from the supplier saying your contract has ended and you have not renewed.

If you are unsure, call the supplier and ask directly what tariff you are on, when your last fixed contract ended, and whether there is a notice or termination requirement before you can leave.

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How to get off them

The route off out-of-contract rates is to agree a new contract, either with your current supplier or a new one. Depending on your circumstances, there are a few ways to do it:

• Switch as soon as you can. Out-of-contract rates rarely carry a notice period, so you can usually move the moment a new deal is agreed. You pay the higher rate until the switch completes, so start early.
• Lock in a deal before your term ends. Fixed prices can often be agreed months ahead, which avoids the default rate entirely. Make sure you give notice correctly so the switch is not blocked.
• Use a change of tenancy. If you are moving premises, a change of tenancy lets you leave without early exit terms.
• Ask about blend and extend. Some suppliers fold a lower current wholesale price into a longer fixed term, lowering your unit rate now in return for a longer commitment.

Two practical points matter whichever route you take.

First, serve notice correctly. Many business contracts require you to give written termination notice within a set window before the end date, otherwise the supplier can object to a switch or keep you on its terms. If you have already fallen out of contract, the rules on leaving are usually more relaxed and often allow a switch with a shorter notice period, but the exact terms are supplier-specific. Confirm what applies with your supplier in writing so there is a record.

Second, if you use a broker to compare deals, ask how they are paid, as their fee may be built into the unit rate you are quoted.

For current rules, microbusiness protections, and what suppliers are required to tell you about contract end dates, check Ofgem. A microbusiness, broadly defined by employee numbers or energy use, has extra protections. These include a minimum termination notice period, clearer information about renewal, and an easier process to switch when out of contract. Ofgem sets out the current thresholds and entitlements.

Your situation may be slightly different. ask a question below ↓ and our editorial team will reply with our advice.

Common questions

Can I leave out-of-contract rates at any time? Usually yes. With no fixed term to tie you in, you are generally free to switch once a new contract is in place. You pay the default rate until the new supply starts, so there is no reason to wait.

If something goes wrong

Should you feel your contract end or switch has been mishandled by your supplier, begin with a formal complaint directly to them. If it is not resolved within eight weeks, or you reach a deadlock, microbusinesses can take the case to the Energy Ombudsman, whose decision is binding on the supplier. Citizens Advice also publishes guidance for small businesses on energy contracts and disputes.

Rules and protections can differ in detail across England, Scotland and Wales, and the supplier market moves quickly. Treat Ofgem and GOV.UK as the source for current figures and entitlements rather than any quoted rate. The general principle holds: out-of-contract rates are a costly default, and the sooner you replace them with an agreed deal, the better.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Out of Contract Energy Rate Checker lets you find out if your business is stuck on expensive out-of-contract energy rates, and how to escape. Try it now →