Deemed Rates – Don’t Get Caught Out

You can do many things to reduce your energy bills in the workplace – from upgrading your lighting to installing solar panels.

Another way to lower your bills? Making sure you’re not on a deemed contract.

Let’s take a look at deemed rates, how they work, and how to make sure you don’t end up paying over the odds for your gas and electricity.

What is a Deemed Rate?

A deemed rate tariff is the default rate that energy suppliers charge when there’s no contract in place.

Deemed rates apply in three specific circumstances:

1. You move into a building and use gas or electricity without agreeing to an energy contract with your supplier of choice
2. Your contract is cancelled, either by you or your energy supplier, and you continue to use gas and electricity
3. Your fixed term contract ends. In this scenario, a deemed rate is referred to as an ‘out-of-contract’ rate

How Much Do Deemed Tariffs Cost?

While the default rate will vary from supplier to supplier, you could end up paying up to 80% more for your energy, both in unit prices and standing charges. 

Deemed rates aren’t fixed, meaning the amount you pay can fluctuate day-to-day depending on market conditions.

Energy providers must display deemed rate tariff costs online.

Why are Deemed Rates So Expensive?

Energy suppliers buy their gas and electricity from the wholesale electricity market. They use the contracts they have in place with customers to determine how much energy they need to buy.

If a customer isn’t on a contract, the energy supplier won’t know how much gas and electricity they need to purchase to meet their needs. As a result, they have to charge more.

If I’m on a Deemed Rate, Do I Have to Pay It?

Yes. A deemed tariff is legally binding, meaning you must pay any charges.

However, an energy supplier needs to clearly inform you that you’re on a deemed rate and advise you of other contract options. 

If you think this isn’t the case, there may be scope for recourse.

Are There Any Circumstances Where It’s Worth Staying on a Deemed Tariff?

There might be some scenarios where it’s easier to keep a deemed rate in place. For example, if you’re only staying in a property for a short amount of time, or you’re unsure about your future plans.

In most circumstances, though, moving to a contracted tariff is far more cost-effective.

Am I Tied to a Deemed Tariff?

No. 

The good news about being on a deemed tariff is that you’re not locked into it. This means you can easily switch to a new supplier or move to a new tariff with the same provider.

Your supplier can’t charge you a termination fee or prevent you from moving. You also don’t need to give notice to cancel your contract.

How Can I Avoid Being Put on a Deemed Rate?

Deemed rates are expensive, and the scary thing is that a lot of businesses use them by default. According to Ofgem, one in ten micro-businesses are on deemed tariffs.

Here are our top tips for making sure you don’t end up on a deemed rate.

Prepare Before You Move

You can arrange an energy contract to start on the day you move into your new property, so it pays to get the paperwork in place beforehand.

Bear in mind that it can take between four to six weeks to move to a new contract.

Moving into a new building? See how much a new electricity connection costs.

Know When Your Contract Renews

If you’re already on a contract, know when it’s up for renewal. This information should be clearly visible on your energy bill.

You can then take action to arrange a new contract ahead of time, meaning you won’t end up on an out-of-contract rate.

Use a Procurement Company

The easiest way to manage your energy contract and ensure you don’t end up on a costly deemed tariff is to use a procurement company like Tritility.

We’ll match you with the right product and tariff for your needs and budget, making sure your energy needs align with your business goals. Plus when your contract is up for renewal, we’ll do the work behind the scenes so you don’t go out of contract.

Get in touch today to see how we can help.