Deemed and Out-of-Contract Rates. What happens when your fixed rate business energy contract ends?

Deemed and out-of-contract rates are default variable tariffs that suppliers will apply to your business energy contract if you don't sort a fixed-rate deal. There's a slight difference between the two that we'll explain later, but if you find yourself on either contract, you should switch to a new fixed-rate deal as soon as possible.

Accidentally rolling onto out-of-contract rates is easily done, especially if your fixed-rate contract runs for two or more years. Most business owners focus on getting the best deal when they sign a new energy contract. Once those rates are locked in, they often forget all about it.

But letting your fixed-rate contract expire without sorting out a new one can have costly consequences. Your supplier won't simply let your deal carry on at the same rate. Instead, you will be moved onto a variable default tariff that can cost more than the fixed rate deal you were on. Unlike fixed rates, variable contracts can also be affected by market volatility. 

Understanding what those default tariffs are, why they exist, and how to get off them quickly is a simple way to reduce your business gas and electricity costs.

In this guide to deemed and out-of-contract rates...

• Deemed and out-of-contract rates are expensive default tariffs set by your supplier
• The average customer saves 35% by signing a direct contract with MoneySuperMarket and Bionic, versus going out of contract
• Businesses are moved onto them automatically when a contract expires without renewal
• You can exit a deemed contract at any time, with just 28 days’ notice
• Switching to a fixed deal as quickly as possible is the most effective way to cut costs

What are out-of-contract rates?

Out-of-contract rates are the tariffs your existing supplier moves you onto when your fixed-rate contract expires without having a replacement deal in place. This isn't a penalty - they are your supplier’s standard variable rate, applied by default when there is no other agreed contract in place.

The problem is that out-of-contract rates are almost always significantly higher than the rates available on a new fixed deal. Business energy suppliers have little commercial incentive to offer competitive rates to businesses that have not actively compared business energy quotes, so these default tariffs tend to sit at the top of the pricing range.

Figures from our partners at Bionic show that, in 2026, average out-of-contract electricity rates for SMEs are running at around 38p per kWh, with a standing charge of £2.58 per day. For gas, out-of-contract rates average at 11p per kWh with a standing charge of £3.41 per day.

Out-of-contract rates are variable and set at the supplier's discretion. And there is no price cap on business electricity or business gas in the UK, as there is for domestic supply. Ofgem does place obligations on suppliers to treat customers fairly, and microbusinesses have additional protections, which you can read about in our small and micro business energy guide. 

But these rules don't prevent suppliers from pricing default tariffs significantly above competitive market rates.

If you are on out-of-contract rates, switching to a fixed deal should be an immediate priority. You can exit an out-of-contract arrangement with 28 days’ notice and no early termination charge.

What are deemed rates?

Deemed rates are a related but distinct type of default tariff, and it is important not to confuse the two. While out-of-contract rates apply when an existing contract expires, deemed rates apply when a business occupies premises and uses energy without having formally agreed to any contract at all.

The most common scenario is a business moving into new commercial premises. If you move in and begin using energy without contacting the existing supplier to arrange a contract, you will be automatically placed on that supplier’s deemed rate tariff. Your energy supply remains unaffected, but the supplier charges you at the highest available rate until you agree to a new deal.

Moving into new business premises? Read this first

If you are taking on a new commercial lease or purchasing a business property, you will almost certainly be placed on deemed rates from day one unless you take action before moving in. Here is what to do:

• Find out who supplies energy to the premises. Ask the landlord, estate agent, or outgoing tenant. If they don’t know, you can use the National Grid’s online tools to identify the current electricity supplier using the MPAN number, or contact Xoserve for gas supply information.
• Contact the supplier as soon as possible. Let them know you have moved in and are the new occupier. Ask for a change-of-tenancy contract while you arrange a permanent deal.
• Start comparing deals immediately. You are not obliged to stay with the existing supplier. Use a comparison service to find the best available deal for your business from across the market.
• Give 28 days’ notice to switch. Once you have agreed a new deal with a different supplier, the existing supplier is notified, and your switch is completed within five working days of the agreed start date.

You can learn more in our guide to moving business premises and Change of Tenancy (CoT).

Why are default energy tariffs more expensive?

Default tariffs - both deemed and out-of-contract - exist because suppliers are required to provide energy to any business that requests it, even without a negotiated contract in place. The deemed or out-of-contract rate is the supplier’s published default for this scenario, and it is set to reflect the supplier’s cost of providing unplanned supply while also generating a commercial return.

There is no regulatory price cap on business energy in the UK. Ofgem does place some limits on how suppliers can behave - for instance, they can't charge unlimited amounts, and they must act fairly — but these protections are general in nature and don't stop suppliers from setting default rates that are substantially higher than their competitive fixed-rate offers. 

The wholesale market disconnect

Fixed-rate deals are priced based on the wholesale energy market at the point of agreement, with the supplier taking on the risk of future price movements. Default tariffs, by contrast, are set at the supplier’s discretion and updated periodically. 

They don't necessarily pass on wholesale market savings in the way that a competitive fixed deal would, and they don't offer protection from market volatility. This means businesses on default tariffs often get the worst of both worlds - high rates and no protection against further increases.

The cost of doing nothing

Suppliers are aware that businesses on default tariffs may not be as engaged in the energy market as those that fix their rates. And doing nothing comes at a cost. The average customer saves 35% by signing a direct contract with MoneySuperMarket and Bionic, versus going out of contract

How businesses end up on default tariffs

There are two main routes to a default tariff. Both of which are avoidable with a little planning.

Missing the renewal window

Business energy contracts include a notice period, which is usually between 28 and 90 days before the contract end date. This is the time during which you must give notice if you want to switch suppliers or renegotiate your deal. If you miss this window and don't act before your contract ends, you'll end up on out-of-contract rates as soon as your fixed contract ends.

Moving into new premises

As described above, taking on new commercial premises without sorting out an energy contract means you'll automatically be placed on the supplier’s deemed tariff. This is the most common reason for businesses to find themselves on deemed rates. But it is entirely avoidable if you act before you move in.

The cost of inaction: a worked example

A small business using 15,000 kWh of electricity per year:

• On a fixed deal at 26p/kWh: £3,900 per year
• On out-of-contract rates at 38p/kWh: £5,700 per year
• On deemed rates at 43p/kWh: £6,450 per year

The gap between a competitive fixed deal and deemed rates in this example is £2,550 per year. For a business on a three-year rollover contract at elevated rates, the total overspend could top £7,500.

How to avoid deemed and out-of-contract rates

Avoiding default tariffs requires only two habits: knowing when your contract ends, and comparing quotes before it does.

• Make a note of your contract end date and notice deadline. When you sign a business energy contract, immediately make a note of the end date and notice period. Set a calendar reminder three to six months before your end date so you have time to compare properly.
• Don't rely on your supplier’s renewal offer. Suppliers are required to notify you before your contract ends, but their renewal offer is rarely the most competitive rate available. Always compare quotes before agreeing to any renewal.
• Act before moving into new premises. Contact the existing energy supplier before or on the day you take possession of new premises. Even a temporary change-of-tenancy arrangement is better than landing on full deemed rates from day one.
• Use a broker or comparison service. Using a price comparison service or business energy broker means you can compare deals across a panel of suppliers and get support with the switch. This is particularly useful if you have multiple meters or complex usage patterns.
• Review your contract annually. Even if you are mid-contract, it is worth knowing your end date and understanding what options will be available at renewal. The energy market moves quickly, and early awareness can often mean better decisions.

How to switch from a default tariff

If you are already on a deemed or out-of-contract tariff, make it your priority to move onto a fixed contract as quickly as possible. The good news is that both types of default contract can be exited without penalty.

Out-of-contract rates: exit with 28 days’ notice

If your fixed contract has expired and you are on your supplier’s out-of-contract rates, you can switch to a new supplier at any time. You do not need to wait for a contract end date or renewal window, as out-of-contract arrangements are variable and only need 28 days’ notice to exit. Once you have agreed a deal with a new supplier, the switch is typically completed within five working days under the Ofgem Energy Switch Guarantee.

Deemed rates: also exit with 28 days’ notice

Deemed contracts operate on a rolling 28-day basis. This means they can be cancelled with 28 days’ notice at any point, and there is no minimum term or early exit charge. If you have recently moved into premises and found yourself on deemed rates, you are not locked in. Compare quotes and give notice as soon as you have agreed on a new deal.

Your situation	What you should do
Fixed contract expired — on out-of-contract rates	Compare and switch immediately. 28 days’ notice, no exit fee.
Moved into premises on deemed rates	Compare and switch immediately. 28 days’ notice, no exit fee.
Rolled into a new fixed term automatically	Check your contract end date. Begin comparing 3–6 months before it expires. Exit fees apply if you leave early.
Mid fixed contract, not yet expired	Note your renewal window. Begin comparing 3–6 months before the end date. Do not wait for a supplier renewal letter.

Frequently asked questions on deemed and out-of-contract rates

Still unsure about deemed and out-of-contract rates? Check out the answers to our most frequently asked questions.

Are deemed energy contracts legally binding?

Yes. Deemed contracts are legally valid contracts, even though they are entered into without explicit negotiation or signature. By using energy from the supply at a premises, you are accepting the supplier’s deemed rate terms. The contract is enforceable, and you are liable for the energy you consume during the deemed period. However, deemed contracts operate on a rolling 28-day basis, meaning you can exit at any time with 28 days’ notice once you have arranged an alternative deal.

Why are deemed rates higher than fixed tariffs?

Deemed rates are set at the supplier’s discretion and are not constrained by competitive market forces in the way that fixed deals are. A fixed deal is negotiated against the wholesale market, with multiple suppliers competing for your business. Deemed rates are applied by default to businesses that have not entered that competitive process. Suppliers also factor in the administrative cost and risk of unplanned supply into deemed rate pricing. Ofgem requires suppliers to act fairly, but there is no regulatory ceiling on deemed rates in the way that the domestic price cap limits household energy costs.

Can I negotiate a deemed tariff?

In some cases, yes — particularly if you contact the supplier quickly after moving into premises and make clear that you intend to compare the market. A supplier may offer a short-term contract at a lower rate to retain your business. However, any single-supplier offer should always be compared against the wider market before you agree to it. A comparison service will typically find you a better rate than direct negotiation with the incumbent supplier alone.

How quickly can I leave a deemed contract?

You can exit a deemed contract at any time by giving your current supplier 28 days’ notice. Once you have agreed a new deal with a different supplier, that supplier will handle the notification and switching process. The switch itself is completed within five working days of the agreed start date under the Ofgem Energy Switch Guarantee. In practice, from the point of agreeing a new deal to being on your new contract, the total process takes around four to six weeks.

Are deemed contracts common for SMEs?

Deemed contracts are particularly common for small businesses because they are most likely to arise in situations that small business owners navigate without specialist support — moving into new premises, inheriting a business with existing leases, or simply not noticing that an energy contract has expired. They are also common in short-term or serviced office arrangements where the building manager handles energy and the business is simply billed at whatever rate the manager has agreed.

Do deemed rates change frequently?

Deemed rates can change at any point at the supplier’s discretion, because they are variable tariffs with no fixed term. Unlike a fixed contract, where your rate is locked for the duration, deemed rates offer no protection against price increases. Given that deemed rates are already at the top of the pricing range, any increase makes an already expensive situation worse. This is another reason to exit deemed rates as quickly as possible rather than waiting to see if the market improves.

Can brokers help exit deemed contracts?

Yes, using MoneySuperMarket and Bionic means you can quickly compare deals across a panel of suppliers and get support with the switching process. This can be particularly useful if you are on deemed rates following a change of premises and need to act quickly across multiple meters. Make sure any broker you use is transparent about how they are paid. Bionic will always let you know how much commission they are set to receive from the supplier before you sign your contract.

What documents are needed to switch?

To compare and switch business energy, you will need your MPAN number (for electricity) and MPRN number (for gas) — both are printed on your energy bill or available from your current supplier. You will also need your estimated annual consumption in kWh, your business address and company details, and your current contract end date if applicable. If you are on deemed rates, you may not have a bill yet — in that case, contact the supplier to request your meter reference numbers and consumption data.