Deemed rates and the do nothing default
Your business energy supplier is quietly counting on one thing: that you’ll be too busy running the place to sort your contract before it ends. You run a shop, a salon, a small office. The renewal letter lands in a pile of other admin, the end date slides past, and you get moved onto what the industry calls deemed rates. They’re the default, and the default is rarely on your side.
These are the most expensive way a business can buy its energy, and plenty of firms are sitting on them right now without knowing it. The good news is that getting off them is quick, and you’re never locked in. Here’s how the trap works, and how to walk straight back out of it.
What are business energy deemed rates?
Deemed rates are the tariff your supplier puts you on when there’s no active contract in place, usually because a fixed deal has ended and nothing new was agreed. You haven’t signed anything, so the supplier “deems” a rate for the energy you carry on using. Unlike your home, business energy has no Ofgem price cap, so there’s no ceiling on what those rates can climb to (Ofgem, checked July 2026).
A deemed contract is slightly different from a plain out of contract rate, and the exact label depends on your supplier. For your bill, though, the effect is the same. You’re paying a rolling rate you never chose, and it’s set to protect the supplier, not you.
Why are deemed rates so high?
Because the supplier is pricing in uncertainty. When you sign a fixed deal, it knows roughly how much energy you’ll take and for how long, so it can buy ahead and price you accordingly. On a deemed contract it knows none of that. You could leave next week or stay for a year, so it builds that risk into the rate, and you’re the one who pays for it.
There’s no reward for loyalty here, and no volume discount for staying put. The rate simply reflects the supplier covering its own risk, which is why doing nothing quietly becomes the priciest option on the table.
How much more do deemed rates cost?
Deemed rates are typically a good deal higher than a fixed contract, in some cases roughly two to three times as much per unit, depending on your supplier, your usage and when your last deal was struck. We’d treat any figure as an estimate, because business rates aren’t capped or published the way domestic ones are. The direction, though, is never in doubt. The default costs more.
Put it in plain terms. Every week you stay put, you pay a premium for exactly the same electricity and gas you’d get on a proper deal. Nothing about your supply gets better. Your bill just quietly swells while you’re looking the other way.
How to get off deemed rates in five steps
The fix is simple, which is exactly why it’s worth doing today rather than putting off to next quarter.
Five ways to avoid the deemed rates trap
- Find your contract end date now, before it finds you, and put it in the diary.
- Start comparing deals three to six months out, not the week your contract lapses.
- Give notice if your supplier asks for it. Some still need written notice to stop a contract rolling over.
- Already on the default? Compare and switch straight away. There’s nothing to wait for.
- Keep a recent meter reading handy so a new supplier can quote you accurately.
Because there’s no lock in on a deemed contract, you can move the moment you find something better. No exit fee, no notice period to sit through.
What are your rights on a deemed contract?
More than you might think, and they all point towards switching sooner. Under Ofgem rules, you can leave a deemed contract whenever you like. Your supplier can’t charge you an exit fee for it and can’t tie you into a notice period, so there’s no penalty for getting off deemed rates the day you decide to (Ofgem, checked July 2026).
If you count as a microbusiness, you get extra cover. Since 2025, Ofgem’s microbusiness rules mean clearer renewal information, a cooling off window on some verbal contracts, and brokers having to be upfront about their costs. It’s worth checking whether your firm qualifies, because the protections are real and they cost you nothing.
For the wider picture on how business deals are put together, our 2026 guide to business energy contracts runs through fixed, flexible and everything between. If a broker is involved, the new Ofgem broker rules are worth a read too.
None of this is about panic. It’s about not paying a loyalty tax for standing still. Deemed rates exist because most businesses never get round to switching, and that inertia is precisely what a quick comparison undoes. Check your end date, compare while you’ve got time, and don’t let a lapsed contract choose your rate for you.
Frequently asked questions about deemed rates
- How do I know if my business is on deemed rates?
- Check a recent bill or call your supplier and ask whether you’re on a contracted, out of contract or deemed rate. If your fixed deal has ended and you didn’t sign a new one, you’re almost certainly on the default.
- Can I switch away immediately?
- Yes. There’s no lock in on a deemed contract, so you can switch as soon as you’ve found and agreed a new deal, with no exit fee to pay.
- Are deemed rates the same as out of contract rates?
- They’re closely related, and both are rolling default rates you never chose. The exact label varies by supplier, but the takeaway is the same: they usually cost more than a fixed deal.
- Do the default rates apply to both gas and electricity?
- Yes, either fuel can land on a deemed rate if its contract lapses. It’s worth checking both, since they can renew on different dates.
- Will switching away disrupt my supply?
- No. Switching business energy supplier doesn’t interrupt your gas or electricity. The same energy arrives through the same pipes and wires, just billed at a rate you actually agreed to.
