Deemed rates for business energy explained: how to avoid unnecessary costs

Running a business means balancing countless priorities. Looking after customers, managing cash flow, supporting employees and planning for growth often come before reviewing your energy contract. 

That's why many businesses only discover they're on deemed rates after receiving a bill that feels higher than expected. 

The challenge is that deemed rates can quietly increase energy costs over time, making it harder to budget, plan and invest with confidence. And because your supply continues as normal, it's easy for the issue to go unnoticed. 

The good news is that deemed rates are usually avoidable. 

In this guide, we'll explain how deemed rates for business energy work, why they can be expensive, and the practical steps you can take to gain greater control over your energy costs. 

Quick summary 

• Deemed rates for business energy are temporary variable rates applied when a business uses energy without agreeing a formal contract with a supplier.  
• They're commonly applied when a business moves into new premises or starts using energy before arranging a contract.  
• Deemed rates are typically more expensive than negotiated business energy contracts. 
• Businesses can end up on deemed rates without realising, particularly after a property move or change in occupancy.  
• Staying on deemed rates can reduce cost certainty and make budgeting more difficult. 
• Reviewing your contract early can help provide greater transparency, improved control and a clearer view of your energy costs. 
• Working with a trusted energy supplier can help you avoid default arrangements and make more informed energy decisions. 

What are deemed rates for business energy? 

A deemed contract is a temporary energy arrangement that applies when a business uses electricity or gas without agreeing a formal contract with a supplier. 

According to Ofgem, deemed contracts commonly occur when a business moves into a property and begins using energy before putting a contract in place with the existing supplier. They can also apply in other situations where a supply is being used without an agreed contract.  

Deemed contracts play an important role because they ensure businesses continue to receive energy. Your lights stay on, your operations continue and there's no interruption to supply. 

However, they're designed as a temporary arrangement rather than a long-term solution and are setup as variable rates. 

That's why deemed rates are often more expensive than negotiated business energy contracts. If you're unsure whether your business is currently on a deemed arrangement, or you'd like to understand how these rates compare to other default contract types, read our support page on out-of-contract and deemed rates. 

Why do businesses end up on deemed rates? 

Most organisations don't actively choose deemed rates. They simply find themselves on them. 

Common scenarios include: 

Moving into new premises 

When you're focused on relocating staff, equipment and operations, sorting out the energy contract can easily slip down the list of priorities. 

Changes in tenancy 

If a previous occupier leaves without a clear handover of energy arrangements, the incoming business may be supplied on deemed rates until a contract is agreed. 

Business acquisitions 

When taking over a new site or organisation, contract details can sometimes get lost amongst wider operational changes. 

Missed renewal opportunities 

Contract end dates can be surprisingly easy to overlook, particularly for businesses without dedicated energy procurement resources. 

Limited visibility 

Many businesses simply don't realise they're on deemed rates until they start investigating unexpectedly high costs. 

Why deemed rates can cost your business more 

While the additional cost is important, many businesses find the biggest challenge is the lack of control. 

Without an agreed contract in place, it can be harder to plan ahead and gain certainty over future energy costs. 

Reduced cost certainty 

Budget certainty is important for every business. Whether you're managing one site or multiple locations, understanding future costs helps you make decisions with confidence. 

Deemed rates don't provide the same opportunity to align your energy arrangements with your wider business objectives. 

Higher energy spend 

Because deemed contracts are intended as a temporary supply arrangement, they typically carry higher charges than contracted business energy rates.  

Over time, that additional spend can have a meaningful impact. 

Missed opportunities to optimise your energy strategy 

Remaining on deemed rates may mean missing the chance to explore solutions that offer: 

• Greater budget certainty 
• Better visibility of costs 
• More flexible contract structures 
• Renewable electricity options 
• Improved customer support 
• Resources directed away from growth 

Every unnecessary pound spent on energy is a pound that can't be invested elsewhere in your business. 

Whether that's supporting your people, investing in new equipment or developing new opportunities, energy costs influence broader business outcomes. 

The hidden cost of doing nothing 

For many businesses, deemed rates aren't the result of a deliberate decision. 

They're usually the outcome of a busy period, a property move, or a contract that simply wasn't top of the agenda at the time. 

Energy can be very complex, and when you're juggling competing priorities it's understandable that contract reviews can be pushed back. 

But delaying action can come at a cost. 

The longer a business remains on deemed rates, the greater the risk of: 

• Paying more than necessary 
• Missing opportunities to improve cost certainty 
• Having less visibility over future energy spend 
• Remaining on an arrangement that no longer meets business needs 

The goal isn't always finding the lowest possible rate. It's finding an energy arrangement that gives your business the right balance of cost certainty, transparency and support. 

Five signs your business could be on deemed rates 

Not sure if your current arrangement is right for your organisation? 

Here are some common warning signs. 

1. You've recently moved premises 

If you've taken over a new property and haven't actively agreed an energy contract, it's worth checking your current status. 

2. You don't know when your contract ends 

A lack of visibility around contract dates can sometimes indicate that your energy arrangements haven't been reviewed recently. 

3. Your bills seem unexpectedly high 

While wholesale market movements can influence costs, significant increases should always prompt a review. 

4. You don't know who supplies your energy 

This happens more often than many businesses realise, particularly after property changes or organisational transitions. 

5. Your bills are difficult to understand 

If you're struggling to identify what you're paying for, there may be an opportunity to improve transparency and gain a clearer understanding of your costs. 

Deemed rates vs negotiated business energy contracts 

The difference isn't just about price. It's about choice, visibility and control. 

Deemed Rates

• Applied automatically when no contract is in place
• Designed as a temporary arrangement
• Limited control over energy costs
• Typically higher-priced tariffs
• Reactive approach to energy management
• Limited visibility of future costs

Negotiated Business Energy Contract

• Agreed directly with an energy supplier
• Built as a longer-term solution
• Greater flexibility and choice
• Usually more competitive pricing
• Supports a planned energy strategy
• Improved cost visibility and transparency

For many businesses, the real value comes from moving from a reactive position to a more proactive one. 

How to move off deemed rates 

If you’re unsure your current setup fits your business, these simple steps can help. They show where you stand and what options may be available for business energy solutions. 

Confirm your current contract status 

Contact your supplier and ask: 

• Are we currently on deemed rates? 
• What charges are we paying? 
• What alternative contracts are available? 

Understand your energy usage 

Having a clear picture of your consumption helps create a stronger foundation for decision-making. 

Consider your wider business priorities 

Think beyond the unit rate. 

Ask yourself: 

• Do we need greater budget certainty? 
• Are we planning for growth? 
• Do we have sustainability goals? 
• Would improved visibility help our financial planning?
• Review available options 

The best solution isn't always the lowest headline price. 

A contract that provides greater transparency, predictability and support may deliver more long-term value. 

Plan ahead 

Starting renewal discussions early gives your business more time to assess options and avoid default arrangements. 

How to avoid deemed rates in the future 

One of the best ways to avoid deemed rates is to stay ahead of your renewal window. Our guide on what to do when your business energy contract is ending explains the steps you can take to review your options and avoid default arrangements. 

Practical steps include: 

• Keeping a record of contract end dates 
• Starting renewal discussions well in advance 
• Reviewing your energy arrangements regularly 
• Maintaining accurate meter and site information 
• Assigning ownership of energy procurement internally 
• Working with a supplier that provides proactive support 

A little planning today can help you avoid unnecessary costs tomorrow. 

Watch our video about business energy that doesn't cost the earth

You don't have to navigate it alone 

From fixed and flexible contracts to renewable electricity solutions, we help businesses find an approach that aligns with their priorities, whether that's greater budget certainty, support with sustainability goals or simply making energy easier to manage. 

If you're reviewing a deemed contract or approaching renewal, we can help you understand your options and find a solution that's right for your business. 

Get your personalised business energy quote today. 

Because energy works best when it's helping your business move forward, not creating additional complexity.