Out of Contract and Deemed tariffs explained

Out of Contract and Deemed tariffs can be significantly more expensive for your business.

What are Out of Contract rates?

Out of contract rates are charged when a customer's energy contract comes to an end and no new arrangement has been made with their current supplier for a continuing tariff and no agreement exists to switch to a new provider.

This situation can arise in cases where a contract termination notice has been provided but no new supplier has taken over or where there is a delay in the transfer such as an objection by the incumbent supplier. If your current supplier has raised an objection to you transferring your supply contact them immediately to find out the reason. Often there is confusion over the relevant dates of your contract but sometimes other factors can apply such as an overdue invoice from the contract period.

The out of contract tariff will prevail until such time as a new contract is agreed, the customer leaves the premises or they arrange to switch to a new supplier. Out of contract rates are one of the most expensive types of tariff and often catch businesses unawares.

If you think you may be on out of contract rates, check your bill, Ofgem has stipulated that suppliers must make this information clearly available on every invoice.

Often the supplier will stipulate in the terms and conditions of the initial contract a variable tariff to continue when the initial contract expires. Variable tariffs are generally more expensive than an agreed price and in most cases require submission of a termination notice from the customer to cancel, effectively keeping the customer in a contract often without their knowledge.

Why are out of contract rates more expensive?

Suppliers charge more for customers who are on out of contract tariffs because historically these types of customer are more indebted than those still within their initial contract term. Typically such customers do not service their accounts with a direct debit and this also makes them more expensive for the supplier. However, crucially one of the most important characteristics of an out of contract energy supply that also makes them inherently more expensive is the ability to switch supplier immediately. Most suppliers are unwilling to 'hedge' ahead for power used by their out of contract customers and this simply means they pay more.

How can we help your business?

Out of contract rates are expensive and paying these tariffs for the long term can have serious implications for your business.

Our team will use their expert industry knowledge to find the best tariff for your business by switching you to a cheaper supplier or usng our industry position to negotiate a better contract with your existing supplier.

To find out more about how we want to help, please get in touch.

What are Deemed Rates

Deemed rates are similar to out of contract rates, arising where there has never been a formal contract between supplier and customer in place at a property, this is almost exclusively the case when a business moves into a new premise when there is a change of tenancy.

Deemed rates are so called as the incoming customer is "deemed" to have a contract with the incumbent supplier under the 2002 Utilities act; although in practice this is a very loose contract with little more obligation on the customer than to require payment for the energy used.

Deemed rates are significantly higher than a contract tariff and only marginally cheaper than an Out of Contract tariff.

Your supplier is obliged to publish information regarding their deemed tariffs on their website however we have collated some useful information below, please note suppliers can and do change their deemed tariffs regularly so if you are at all unsure please check your current suppliers website or a recent bill.

The incumbent supplier cannot object to you switching to a cheaper supplier and we can help you to do just that. You do not need to submit a termination notice and there will be nothing to pay apart from any energy you may have used up to that point.

Why are deemed rates more expensive?

Suppliers charge more for customers who are on deemed tariffs because historically these types of customers are more indebted than those on agreed contracts.

Typically they do not service their accounts with a direct debit and this makes them more expensive for the supplier.

Crucially however it is one of the most important characteristics of a deemed energy supply that makes them inherently more expensive, the ability to switch supplier immediately. Most suppliers are unwilling to 'hedge' ahead for power used by their deemed customers and this simply means they pay more.

How can we help your business?

Deemed rates are expensive and paying these tariffs in the long term can have serious implications for your business.

Our team will use their expert industry knowledge to find the best tariff for your business by switching you to a cheaper supplier or using our industry position to negotiate a better contract with your existing supplier.

To find out more about we would like to help, please get in touch.