Deemed Rates for Business Electricity Explained

Deemed rates are the prices a supplier charges when your business is using gas or electricity without an agreed contract in place. They usually apply when you move into new premises and start drawing on the existing supply, or when an old contract ends and you have not signed a new one. They are typically among the most expensive rates a business can be on, so getting off them quickly is usually worth your time.

The principle is simple. A supplier has to keep the energy flowing even when there is no signed deal, because you are still using it. To cover the commercial risk of supplying someone with no contracted terms, the supplier sets a default price. That price is the deemed rate. You did not choose it and you did not negotiate it, but you are bound by it for as long as you keep taking the supply.

Deemed rates versus out-of-contract rates

These two terms get used loosely, but they are not quite the same thing.

• Deemed rates apply when there is no contract at all between you and the supplier. The most common example is moving into a property and using whatever supply is already connected, without first agreeing terms.
• Out-of-contract rates apply when your previous arrangement has come to an end but you keep taking the supply. This often follows a fixed term contract that has expired without a renewal or switch, but it can also happen when a contract has been ended by either side and the supply continues for a time. You are still with the same supplier, but the agreed terms no longer apply.

In practice both are default rates set by the supplier rather than rates you agreed, and both tend to be expensive. The reason the distinction matters is that the rules and protections can differ, and the steps to fix each situation are slightly different. With a deemed supply you are usually a new customer with no prior arrangement. With an out-of-contract supply you already have a relationship with the supplier, which can make a renewal conversation more straightforward.

Business Standing Charge Calculator

Work out how much your business pays in daily standing charges over a year, for electricity, gas or both, even when a unit is empty.

Try our Business Standing Charge Calculator free, here on this site →

Protection for microbusinesses

Ofgem sets rules that give microbusinesses some protection on deemed contracts. A business may count as a microbusiness if it meets certain thresholds. Broadly, that means employing fewer than 10 people, or having an annual turnover or balance sheet total below a set limit, or using no more than a defined amount of gas or electricity each year. The exact figures are set by Ofgem, so check the current definition before assuming you qualify.

Where the rules apply, suppliers face limits on how they treat microbusinesses on deemed terms, and there are requirements around clear information and the ability to move to a negotiated contract. These rules are reviewed and updated, so do not rely on older summaries. Ofgem publishes the current microbusiness protections, and that is the place to confirm where you stand. Citizens Advice also gives free guidance on business energy issues.

Larger businesses generally have fewer formal protections on deemed rates, which makes prompt action even more worthwhile.

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

How to spot deemed rates on a bill

Your bill will not always use the words "deemed rates" in large print, so it pays to read the detail. Signs to look for include:

• Wording such as "deemed contract", "out of contract", "default rates" or "no contract in place".
• Unit rates and standing charges that look high compared with quotes you have seen elsewhere.
• A recent change of occupancy or a contract end date that has passed.
• No fixed term or renewal date shown anywhere on the bill.

If you are unsure, call the supplier and ask directly what type of arrangement you are on and what rates apply. They should be able to tell you.

How to get off deemed rates

The aim is to replace the default arrangement with a proper agreed contract, either with your current supplier or a new one. A sensible order of steps:

• Confirm with the supplier that you are on deemed or out-of-contract rates, and ask for the current unit rate and standing charge in writing.
• Gather your annual consumption figures, your meter numbers (MPAN for electricity, MPRN for gas) and recent bills.
• Get quotes, either by approaching suppliers directly or through a broker. If you use a broker, ask how they are paid and whether any fee is built into the unit rate.
• Compare the full cost, not just the headline unit rate. Standing charges and contract length matter.
• Agree and sign a contract. Once it starts, you come off the deemed rate.

There is usually no exit fee for leaving a deemed arrangement, because there is no fixed term to break, though it is worth checking. If you believe a supplier has handled a deemed contract unfairly and you cannot resolve it directly, you can take the matter to the Energy Ombudsman. You can only do this once you have a deadlock letter from the supplier, or once eight weeks have passed since you first raised the complaint.

Rules and definitions can differ in detail across Great Britain, and Northern Ireland has a separate regulator, so confirm the position that applies to you. For current microbusiness rules and rates, check Ofgem and GOV.UK.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Business Standing Charge Calculator lets you work out how much your business pays in daily standing charges over a year, for electricity, gas or both, even when a unit is empty. Try it now →