What are Deemed Rates?

Deemed rates are one of the many ways in which some energy suppliers will legally be able to charge you sky-high prices for the energy you use. Often, deemed contracts arise when moving into a new premise without pre-arranging an active energy supply contract. At the point of moving in you are ‘deemed’ to be supplied by the previous inhabitant’s energy supplier. This sentence itself is a bit of a mouthful, and seems to be based on technicality more than anything else.

As you are now deemed to be supplied by whoever it was that supplied the previous owner/tenant/inhabitant – you are now responsible for paying for that supply too.

You are now placed onto a deemed contract. The bad news? Prices on deemed contracts are far higher than any other negotiated contract. This means you will likely be paying a hugely inflated unit price per kWh of energy, and in some cases an obscene daily standing charge too!

Deemed contracts are rolling contracts which last for 28 days, meaning that after the 28-day period is over – you could see a huge increase in prices. Suppliers are regulated by law to inform you, the customer, of other available deals whilst ensuring the terms of the deemed contract are clearly presented and understood.

Are deemed rates common?

Due to the nature of deemed rates, not many customers choose to remain on them. Most commonly it is a case of short-term convenience or forgetfulness that customers remain.

But they are much more common than you would think! It is estimated that around 10% of UK microbusinesses are still currently on deemed-rate contracts…

Are they not the same as out-of-contract prices?

The two are incredibly similar, but also completely different.

Deemed contracts offer (usually) slightly cheaper rates than out-of-contract prices. This is due to the related positioning of the ‘fault’ and who it lies with.

In deemed contracts, the customer is (usually) not at fault. All they have done is moved into a new premise and taken over the supply from the previous tenant.

Out-of-contract customers, have made a conscious decision to not have a contract with an energy supplier – and as such, are at fault.

Deemed contracts are only rates that you have to pay if you are taking over a new premise before organising your own energy supply contract. Out-of-contract rates are prices that you have to pay as your original contract and terms have ended, without organising a replacement.

Small difference in wording, huge difference in monthly prices!

How to avoid deemed rates?

There is not much advice that can be offered here apart from – be organised!

Now you are aware of what deemed rates are and how they arise, you are now far less likely to ever be placed on a deemed contract. If you are moving into a new house, or business location – try to arrange an energy contract before moving-in. It is entirely possible to find all of the information you need to do this, before even moving in!

We appreciate that not everybody will have the luxury of free-time to dedicate to finding the right energy supplier, especially during a stressful time such as moving. If this is the case, and you do find yourself placed on a deemed contract – then don’t panic! It is an easy enough issue to solve.

What are my rights when it comes to deemed contracts?

If you didn’t manage to avoid the dreaded ‘deemed contract’ and are currently paying through the nose for your energy, what can you do? Is it some long and drawn-out hassle? A battle between consumer and supplier?

Nope. You just change contract. It’s that simple, thankfully.

Ofgem (the regulatory body for energy in the UK) has clearly stated that your supplier cannot prevent you from switching supplier if you are on a deemed contract. They are also not able to charge a termination fee, switching fee, moving fee, or any other fee related to switching.

The best part? You don’t even need to give any notice to cancel the deemed contract. It can be done at a time that best suits you.

If you do encounter any issues when trying to switch, or think your supplier may be doing something illegal in order to keep you on a deemed contract – remember to save any correspondence between yourself and your supplier. It may be useful further down the line!

If you would like to simply read more information regarding deemed contracts, then check out Ofgem’s website here:

www.ofgem.gov.uk

Common Questions

Who regulates deemed contracts?

The regulatory body for the UK energy market is Ofgem – you can find out more details on their website here: www.ofgem.gov.uk

Are deemed contracts and out-of-contract prices the same?

No – they are similar, but definitely not the same.

Deemed contracts are usually implemented whenever you move into a new building, without organising an energy contract prior. Out-of-contract prices are used whenever your contract has ended, and you haven’t renewed or found another supplier.

Can I get out of a deemed contract?

Yes, you can. Pretty simply, too.

All you have to do either contact your current supplier and let them know you are switching to another!