Deemed and out-of-contract business energy rates: how do you get off them?

If you're on a deemed or out-of-contract rate, you can usually leave quickly: Citizens Advice says you usually won't need to pay a fee or give notice to switch. Ofgem says these are usually among a supplier's most expensive rates, so agreeing a contract soon is normally worth doing.

This guide explains the difference between the two, the rules that sit behind them, and the steps to get onto a proper contract. It's general information, not legal or financial advice.

What is a deemed rate?

A deemed contract is what you get when you use energy at business premises without having agreed a contract for that supply. Ofgem says this typically happens when you move into new premises and don't arrange a deal, and it can also happen when a contract ends and the supplier keeps supplying you.

You don't sign anything. The supplier that serves the meter simply bills you on its deemed terms from the day you became responsible for the supply. Citizens Advice warns a deemed contract "might cost a lot more than other tariffs" and says to arrange a better deal with that supplier or a new one as soon as possible.

What is an out-of-contract rate?

An out-of-contract (OoC) rate applies when your contract has ended but the supplier carries on supplying the energy you use. It's different from a deemed rate in one important way: you did have a contract with this supplier, and the out-of-contract terms usually come from that agreement.

Ofgem treats them separately in its rules. Its deemed contracts guidance (November 2023) says "OoC rates are not 'deemed'", so the licence condition that controls deemed terms doesn't cover them. In practice, both tend to be expensive.

Why are these rates so high?

Suppliers price deemed rates to cover the extra cost and risk of customers they know little about. Ofgem's guidance accepts that some higher charges can be justified, for example by a higher risk of bad debt and non-payment among deemed customers.

There is a limit, though. Under Standard Licence Condition 7.3, suppliers must take all reasonable steps to make sure the terms of each deemed contract are "not unduly onerous". Ofgem says it looks at:

• the difference between contracted and deemed rates, and the reasons for it
• whether the supplier has a clear, thought-out method for setting deemed prices
• whether prices routinely over-compensate for expected costs

As of October 2026, Ofgem is also reviewing this guidance. Its consultation (19 June to 17 July 2026) proposed clearer rules on bad debt recovery, blocking or delaying a customer's switch, and security deposits. Ofgem hadn't published a decision when we checked. We'll update this post when it does.

Can you switch away straight away?

Usually, yes. Citizens Advice says:

• Deemed tariff: "You usually won't need to pay a fee or give notice to switch."
• Out-of-contract tariff: "You won't need to pay a fee or give notice to switch."

That's the main difference from a fixed-term contract, where leaving early can mean a termination fee. If you're on a deemed or out-of-contract rate, every day you stay is usually costing more than a contract would.

If you think you should be able to switch but your supplier won't let you, Citizens Advice suggests contacting them for help.

Are microbusinesses treated differently?

Yes. If your business counts as a microbusiness, extra rules apply. (Our guide to microbusiness energy rights explains who qualifies.) Citizens Advice says:

• Your supplier should contact you about 3 months before your contract ends with your options. If it doesn't, you can complain to the supplier.
• A contract can include a rollover period to give you time to agree a new deal, but it can't be more than 12 months. Ofgem says the same: for a microbusiness, this contract "can't last more than 12 months".
• When a rollover ends, you're moved onto an out-of-contract tariff.
• On an evergreen contract (one with no end date), you may need to give up to 30 days' notice before you switch.

So a microbusiness that misses its renewal can end up on a rollover deal for up to a year. After that, it moves onto out-of-contract rates. It's worth knowing which of these you're on, because the exit rules differ.

How can you tell which rate you're on?

Look at your latest bill and any letters from your supplier. Things to check:

• The tariff or contract name. Words like "deemed", "out of contract", "variable" or "default" are a sign.
• The end date. If there's no contract end date, or it has already passed, you may not be on a fixed deal.
• The unit rates and standing charge. Compare them with the rates on your last contract, or use our business energy estimator to see how they compare with typical prices.
• Any rollover letter. If you were told you'd been "renewed" or "rolled over", find out the length and the exit terms.

If you're not sure, ask the supplier in writing what contract you're on, its end date and its notice period. Keep the reply.

Our guide to reading a business energy bill shows where each of these appears.

How do you get onto a proper contract?

1. Find your meter numbers. You'll need your MPAN (electricity) and MPRN (gas), shown on your bill.
2. Get a meter reading on the day you take over premises or decide to switch. It protects you from being billed for someone else's use.
3. Ask your current supplier for a contract quote. Moving from deemed to a contract with the same supplier can be quick.
4. Compare with at least two other suppliers or quotes. Compare the unit rate, standing charge, contract length and exit terms, not just the headline price.
5. Check how you're agreeing. If a broker is involved, ask how they're paid. Our broker checks guide explains what to ask. If you agree by phone, read our guide to verbal contracts first.
6. Diary the end date and notice window the day the new contract starts, so you don't drift onto out-of-contract rates again.

Our renewal checklist covers what to check before your next contract ends.

What if you've already paid deemed rates for months?

You'll normally have to pay for the energy you used. But if you think the deemed terms were unduly onerous, or the supplier didn't follow the microbusiness renewal rules, you can complain to the supplier. If that doesn't resolve it, eligible businesses can take it further. Our bill dispute guide sets out the steps, including when the Energy Ombudsman can help.

For a wider overview of fixed, flexible, deemed and out-of-contract deals, see our contract types guide.

What to do next

• ○Check your latest bill for the tariff name, contract end date, unit rates and standing charge
• ○Ask your supplier in writing which contract you're on and its notice period, if anything is unclear
• ○Take and photograph meter readings today
• ○Get a contract quote from your current supplier and at least two others
• ○Compare unit rate, standing charge, length and exit fees side by side
• ○Record the new contract's end date and notice window in your diary
• ○If you're a microbusiness and got no renewal notice, complain to your supplier in writing