What are deemed tariff rates?

A deemed rate contract is put in place when you use energy without having negotiated a deal with your supplier. They are rolling contracts which last for 28 days, meaning that during each month without switching, your payments could increase. The good news is that you can cancel and switch to a fixed contract at any time.

Prices are set by individual suppliers, which means some will charge more than others. But deemed rates are usually among the most expensive, so it makes sense to get off them as soon as possible.

It's also worth noting that Ofgem, the energy regulator, has put measures in place to limit the amount suppliers can charge to make sure customers aren't unfairly charged. But these measures aren't very specific and state that costs must not be 'unduly onerous' and must not 'significantly exceed the costs of supplying gas or electricity. This means you can still be charged higher rates than those offered on fixed-rate deals.

Ofgem has also said that suppliers must inform of other available deals while making sure the terms of your deemed rate tariff are easily understood. But even with these measures in place, there's still some apathy when it comes to switching, mainly by owners of small and microbusinesses.

Government figures show that 26% of businesses with zero employees have never considered switching, compared to 10% of businesses with ten to 49 employees. This means a lot of businesses are still overpaying for energy, highlighting the importance of being proactive when it comes to energy, ensuring you know what type of contract you are on and when it ends.

If you do find out you are on a deemed rate tariff, there’s no need to worry as you can switch to a better deal at any time. Unlike household energy, business energy needs to be switched via telephone rather than online. That’s because there is more to take into account compared to domestic policies.

By speaking to an expert on energy, you can quickly access the best deals without having to do any long-winded research. Simply provide information on your energy usage, business location and some other minor details from your last bill and we will compile a list of the best energy deals. A deemed rate contract is put in place when you use energy without having negotiated a deal with your supplier. They are rolling contracts which last for 28 days, meaning that during each month without switching, your payments could increase. The good news is that you can cancel and switch to an agreed deal in just 28 days.

Regulations have been put in place to limit the amount of deemed energy contracts. These include your provider having to inform you of other available deals while making sure the terms of your deemed rate tariff are easily understood.

There are a number of reasons why deemed rates are more expensive than fixed rates, but it's largely down to the fact that the supplier powering your premises doesn't know much about your business and how it uses energy.

Until the supplier has a better idea about your business, then it will be considered a higher risk and you'll be charged more - remember, credit score can impact the rates your business is offered.

The rates you're offered will also depend upon how and when you use energy. If you've not negotiated a contract with your supplier then it will have no idea of your consumption habits. In such instances, suppliers will always look to charge higher rates to cover a larger section of businesses and make sure they're not undercharging.

Although provisions are in place to make sure businesses on deemed rates aren't unfairly charged, the onus is always on you, as the business owner, to make sure you're on the best possible rates. If you're unsure about how much you should be paying for gas and electricity, check out our guide to business energy usage and rates. Or give our energy experts a call on 0800 188 4930.

Even though deemed rate contracts are some of the most expensive energy tariffs, you’ll still want to ensure you are switching to the best deal, not just a better one. As all businesses are different, what is suitable for one may not be for another.

Our experts will talk you through the following contracts in more detail, but it’s worth knowing from the start what to expect. And it’s most important that you either avoid deemed rates altogether or switch as soon as you realise you are overpaying.

• Fixed Rate Tariffs – The most stable and dependable contract, a fixed rate contract means you’ll know exactly how much you’ll pay for each kWh of energy you use. Of course, your electricity and gas bills will vary depending on how much you use, however they’re the best contract for budgeting purposes.
• Variable Rate Tariffs– As the name suggests, these contracts involve fluctuating prices per every kWh of energy you use. The price is determined by the current energy market, including the wholesale price of energy. When the market is favourable, you’ll pay less. But when it isn’t, you’ll pay more.
• Out-of-contract rates - If you let a fixed deal expire without arranging a new one, your supplier will place you on its out-of-contract rates. These are often more expensive than the rates you're offered on a fixed tariff, but you can switch at any time by giving just 28-days’ notice.
• Rollover Contract – Similar to a deemed rate contract, except they last for one whole year. You’ll want to stay away from both rollover and deemed rate contracts as they feature much higher prices than fixed or variable tariffs.

The most important thing to know about deemed contract energy is the fact you can switch at any time. To do this, you’ll need to speak with energy providers directly or use a broker like Uswitch for Business who will compare a wide range of energy providers from small and local right up to the big six, ensuring you have access to the best deals. To ring providers directly and weigh up the benefits of each can be time-consuming. That’s why we recommend speaking to one of our experts.

Talk to Uswitch for Business today to hear how we can help you find the best deal for your business. We’ll run a business electricity plan comparison and take care of all the details involved in switching.

Give us a call now on 0800 188 4930, or pop your postcode in the box on the right and we'll get back to you.