Deemed rates: what they are and how to escape them

Deemed rates are what a supplier charges when your business uses energy without a contract in place. They arise most often in two situations: you move into a site and start consuming before agreeing terms, or an existing contract ends and nothing replaces it. The supplier sets the rate unilaterally and is required to publish it. It is consistently one of the most expensive ways to buy energy.

The mechanism is worth understanding because it is deliberate. A deemed contract exists so that suppliers are paid for energy consumed without an agreement. But the pricing of deemed rates does more than cover risk. It prices in the fact that the organisation is not paying attention. Businesses land on deemed rates through administrative gaps, not through choice, and the market charges heavily for that gap. Deemed rates are materially higher than negotiated rates. On current supplier default rate cards benchmarked against live market pricing, a business on a deemed rate typically pays 25 to 45% more per kWh for electricity than it would on a negotiated fixed contract, and 40 to 65% more for gas. Standing charges commonly run two to five times higher on top.

One caveat is worth flagging on its own. Legacy deemed contracts placed during the 2021 to 2022 energy crisis can sit far above even that range. Some businesses left on those older placements are reportedly still paying close to £1 per kWh, against a competitive rate of 20 to 25p. That is an outlier from a specific period, not a figure any site would be placed on if it fell onto deemed rates today.

How businesses end up on deemed rates

The common routes are mundane. A site changes hands and no one registers the supply. A contract end date passes unnoticed because renewal reminders went to a former employee. A landlord supply transfers to a tenant without paperwork. None of these are exotic failures. They are the ordinary friction of running an organisation, and the energy market is structured so that ordinary friction becomes expensive.

The clearest version of this pattern is change of tenancy. A business takes on a site and inherits whatever deemed rate the supplier has applied since the change, often without ever realising a contract was never put in place. It runs at the premium above until someone negotiates a proper contract, and every week that passes unnoticed adds to the total. This is most common at lease starts and site acquisitions, the exact moments when energy sits lowest on anyone’s list of priorities.

Your rights on a deemed contract

Deemed contracts carry one useful property: they cannot trap you. A supplier cannot impose a notice period or a termination fee that prevents you from moving to a negotiated contract. Objections to a transfer are restricted. The regulatory intent is clear: deemed rates are meant to be a temporary state, and the rules keep the exit open.

That exit only helps if you use it. The cost of a deemed rate is a function of time, and the businesses that lose most are the ones that do not know they are on one.

Escaping quickly, then deciding properly

The right sequence is escape first, optimise second. Get a negotiated contract in place to stop the immediate loss, even if it is short-term. Then make the real decision with proper information: your half-hourly consumption data, a view of the market, and contract terms read with your interests in mind. Signing a long contract in a hurry just to leave deemed rates swaps one form of overpayment for another.

In practice two tracks run at once. The first is administrative: register the supply, confirm the meter point details, and put a short negotiated contract in place, even a matter of weeks, to stop the deemed rate accruing. The second, run alongside it rather than afterwards, is the measurement step: pull the site’s half-hourly consumption data and read the load shape while the holding contract is live. By the time that short contract is due to end, the evidence needed for the real decision, whether a longer fixed term, a time-of-use structure, or day-ahead pass-through fits the site, already exists. The alternative, deciding the long-term tariff at the same moment you are trying to escape a deemed rate, forces a rushed choice on the one decision that most rewards patience.

If you suspect any of your sites are on deemed rates, the fastest way to find out is a benchmark of what you are currently paying. Request one at /benchmark, or book a review at /book.