Deemed Energy Contract UK: What It Costs and How to Exit

Deemed Energy Contract UK: What It Is, What It Costs, and How to Challenge It

What Is a Deemed Energy Contract?

A deemed energy contract is an energy supply arrangement imposed on a business without an explicit, negotiated agreement. It is triggered automatically in specific circumstances — most commonly when you take over a property, when a new business moves into premises, or when a supplier switch fails partway through the process. You did not sign anything. You did not agree to a rate. But you are being supplied, and the supplier is billing you — at the most expensive tariff they offer.

The word “deemed” is doing a lot of heavy lifting in that term. It essentially means “assumed” — the supplier assumes they have the right to supply you and charge you, and they set the price accordingly.

Quick Answer: What Is a Deemed Energy Contract?

A deemed energy contract is imposed automatically when a business takes over premises, a new tenancy begins, or a supplier switch fails — meaning no contract was explicitly agreed. Suppliers charge deemed rates that are typically the highest available, often far above any negotiated tariff. Businesses on deemed contracts should seek competitive quotes immediately. Telnergy can tender 21+ suppliers within 24 hours and, in appropriate cases, challenge retrospective deemed charges through its mediation service.

The Three Situations That Trigger a Deemed Contract

Understanding when a deemed contract applies is the first step to avoiding — or escaping — one.

Trigger 1: Taking Over Business Premises

This is the most common scenario. You take on a new business premises — whether through lease, purchase, or sub-let — and there is an existing energy supply in place. The previous occupant’s supplier does not know about the change. They continue to supply energy. You are now the occupant receiving that energy.

In this situation, the supplier is legally entitled to charge you for the energy you consume. But they charge you at their deemed rate — not at any rate you have agreed to, and not at a competitive market rate. The deemed rate is, by design, the supplier’s highest tariff. It exists as a default of last resort, not as a fair commercial offer.

Under Ofgem’s standard licence conditions, suppliers are permitted to bill incoming occupants on deemed rates from the date the new occupancy begins. There is no legal ceiling on the deemed rate — it is whatever the supplier decides to charge for supply without a contract.

Trigger 2: New Business Formation at Existing Premises

If you start a new business at premises that already have an energy supply — for example, converting a residential property to commercial use, or registering a new company at a premises where your previous company was the account holder — you may find yourself on a deemed contract until you set up a formal supply agreement.

This is particularly common with startups, sole traders taking on their first premises, and businesses formed after a restructure.

Trigger 3: Failed or Stalled Supplier Switch

When you switch energy supplier, there is a period during which the transfer is being processed through the network. If something goes wrong — an objection raised by the old supplier, a data mismatch in the system, or a technical error — the switch can stall or fail.

In some cases, businesses end up in a limbo where neither the old supplier nor the new supplier has a clear, active contract in place. The incumbent supplier may revert to charging a deemed rate for the period of confusion.

This is infuriating — particularly because the failed switch is often not the customer’s fault. You attempted to secure a better deal, the process broke down, and now you are being charged more than before. This is exactly the kind of situation where Telnergy’s energy mediation service can intervene and challenge the charges directly.

How Much Does a Deemed Contract Cost?

Bluntly: more than anything else your supplier offers.

Deemed rates are deliberately set at the top of the supplier’s tariff structure. They are not designed to be competitive. They are designed to recover maximum revenue from customers who, through circumstance rather than choice, have no other arrangement in place.

While the exact deemed rate varies by supplier and by the prevailing wholesale market, industry analysis consistently shows deemed rates to be among the most expensive tariffs available — often significantly more than even an untendered renewal quote or an out-of-contract variable rate.

To put it in context:

– Rolling/out-of-contract rates are already 40–80% more expensive than negotiated fixed deals (businessenergyuk.com)

– Deemed rates are typically even higher than rolling rates — they sit at the very top of the supplier’s pricing structure

– A business on a deemed contract that has been in place for several months may have overpaid by thousands of pounds compared to what they would have paid on a competitive fixed deal

For a hotel or restaurant taking over new premises and not addressing the deemed supply situation for 3–6 months, the financial exposure can be substantial. At Telnergy’s observed average saving of £38 per day on gas alone, even a 90-day stint on a deemed gas rate could represent over £3,000 in preventable overcharging relative to a properly tendered supply.

What Is the Difference Between a Deemed Contract and a Rolling Contract?

These terms are sometimes used interchangeably, but they describe different situations:

Feature	Deemed Contract	Rolling Contract
How it arises	Change of occupancy, new tenancy, or failed switch	Fixed-term contract expires without renewal
Was there a prior agreement?	Not necessarily — you may never have had a contract with this supplier	Yes — your previous fixed deal has lapsed
Typical cost	Usually the highest tariff the supplier offers	Typically 40–80% above negotiated contracted rates
Exit process	Give notice and switch — usually no exit fees	Give notice (typically 30 days) and switch
Retrospective challenge	Sometimes possible via mediation	Rarely — charges were under a known arrangement

Both situations are serious and both warrant immediate action. But if you are on a deemed contract, the urgency is if anything higher — and the potential for challenging retrospective charges is greater.

For rolling contracts, see our rolling contract guide. For lapsed fixed contracts, see our out-of-contract energy guide.

Your Rights on a Deemed Contract

Despite what some suppliers may imply, being on a deemed contract does not mean you are locked in, and it does not mean all their charges are beyond challenge.

The Right to Switch

Under Ofgem’s non-domestic supply licence conditions, you have the right to switch supplier at any time once you are aware you are on a deemed contract. There are no exit fees on a deemed arrangement — you did not agree to any. You simply give notice and arrange supply with a supplier of your choice.

The standard notice period for terminating a deemed contract is typically 30 days, but confirm this with your current supplier.

The Right to Challenge Retrospective Charges

If you took over business premises and were placed on a deemed contract without being clearly notified of the rate you would be charged, you may have grounds to challenge the amounts billed retrospectively.

Ofgem’s guidance states that suppliers must make deemed rates available and clearly communicable. If you were not informed of the applicable rate within a reasonable timeframe, and the charges are significantly above what you would have paid on a competitive supply agreement, this is a legitimate basis for a complaint.

The Dispute Resolution Ombudsman (whose jurisdiction was extended in December 2024 to cover businesses with fewer than 50 employees) can adjudicate on disputes about deemed contract charges, including retrospective billing. If the Ombudsman finds in your favour, the supplier may be required to reduce the charges, issue a credit, or provide other redress.

Telnergy’s Mediation Service

For complex or high-value deemed contract disputes, Telnergy’s energy mediation service provides direct representation. We have experience challenging retrospective deemed charges on behalf of clients in hospitality, retail, and education — sectors where property changes are frequent and the risk of inadvertent deemed supply is particularly high.

Our mediation team works on your behalf to:

– Document the circumstances of the deemed contract

– Establish what the supplier communicated (and when) about applicable rates

– Negotiate directly with the supplier for a reduction in retrospective charges

– Escalate to the Dispute Resolution Ombudsman (formerly the Energy Ombudsman) if the supplier does not engage constructively

This service is available to Telnergy clients as part of our wider energy management offering.

How to Avoid Being Put on a Deemed Energy Contract

Prevention is significantly easier than cure. Here is what to do in each of the common triggering scenarios.

When Taking Over New Premises

Before you complete the takeover:

Ask the outgoing occupant or landlord for details of the current energy supplier(s), account number(s), and meter serial numbers.
Request the MPAN (electricity supply point reference) and MPRN (gas supply point reference) — these are on any existing bill or can be obtained from the landlord.
Take meter readings on the day you take possession, and photograph them with a timestamp.
Contact the current supplier on or before your first day in occupation to notify them of the change and ask what rate you are being charged.
Immediately instruct Telnergy (or another independent broker) to tender the market so you have a competitive supply agreement in place as quickly as possible.

The deemed contract period is largely unavoidable in the very short term — you will always need a few days to set up a proper supply agreement. But minimising the length of time you are on a deemed rate is entirely within your control. Telnergy’s 24-hour tendering process means you can have competitive quotes in hand within a working day of taking possession.

When Switching Supplier

Keep a record of your switch instruction — including the date you signed the new contract and the expected switch date.
Monitor your bills during the switch period. If you are still being billed by your old supplier well beyond the expected switch date, investigate immediately.
If the switch stalls, contact both your new supplier and your existing supplier to understand why.
If you are told the switch has failed and you have been reverted to a variable or deemed rate, lodge a formal complaint with the new supplier (who is responsible for managing the switch process) and document everything.

Telnergy handles the entire switching process on behalf of clients, including monitoring the switch through to completion. If a switch stalls or fails due to supplier or network issues, we chase it down on your behalf.

Ongoing: Keep Your Contract Calendar Up to Date

The best protection against deemed contract exposure is a clear view of when each of your energy contracts expires and what action is required. This sounds simple, but for businesses with multiple sites — or where procurement responsibility has changed hands — it is easy for gaps to emerge.

Telnergy’s multi-site energy management service maintains a live contract calendar for clients across all supply points, with advance notification of renewal windows. No contract should ever expire without a managed replacement being in place.

Use Case Scenarios

New Restaurant Takeover

A chef-owner took over the lease on a restaurant that had been operating under a different name. The previous operator’s energy contracts were with two different suppliers. There was no formal handover of energy account information.

For the first five months of trading, the new operator received quarterly bills from the incumbent suppliers at deemed rates. When he contacted Telnergy, we found that he had been charged at deemed rates that were approximately 65% above what a competitive tendered rate would have been for the same consumption.

Telnergy tendered new supply agreements for both gas and electricity, put competitive fixed deals in place, and initiated a mediation process with both suppliers regarding the retrospective charges. After a six-week process, one supplier agreed to a partial credit and the other agreed to rerate the supply back to a standard variable rate for the deemed period — representing a meaningful reduction in the total charges.

Hotel Property Change

A hotel group acquired a property as part of an insolvency purchase. The property had been dark for several months and had been placed on a deemed supply arrangement when the previous owner’s accounts were terminated. The new owners took possession without realising the deemed supply was live.

When they began renovation, the energy consumption on the site showed up on the previous operator’s supplier’s system. The supplier began billing the new owner at deemed rates for a property consuming significant electricity for construction tools and temporary lighting.

Telnergy intervened to establish a proper supply agreement, formally registered the new ownership with both the electricity and gas suppliers, and secured a credit for a portion of the deemed charges on the basis that the new owner had not been notified of the applicable rates within a reasonable timeframe.

School Premises Expansion

A primary school took over an adjacent community building that had been transferred to the local authority. The building had an existing electricity supply that had been on a deemed contract since the previous tenant left two years earlier.

When the school began using the building, they inherited not just the electricity supply but also a backlog of estimated deemed-rate bills going back months. Telnergy audited the supply history, established actual consumption via smart meter data, and challenged the estimated billing. New fixed-rate supply contracts were put in place for the school’s main site and the new building simultaneously, and the school saved over £3,200 in its first year by moving off the legacy deemed rates.

Step-by-Step: How to Exit a Deemed Contract

Step 1: Identify You Are on a Deemed Contract

Check your current bills. If you have recently taken over premises, or if a switch failed, call your supplier and ask directly: “Am I currently on a deemed contract?” Also ask: “What is the deemed rate you are charging me?” and “From what date has the deemed supply been running?”

Document this conversation, including the date, time, and name of the person you spoke to.

Step 2: Take and Record Meter Readings

Take a meter reading on the day you confirm the deemed contract situation. This establishes a baseline and prevents future disputes about estimated billing.

Step 3: Tender the Market Immediately

Contact Telnergy or another TPI Code-compliant broker to tender competitive supply deals from multiple suppliers. You need:

– MPAN (electricity) and/or MPRN (gas)

– Annual consumption estimate (from bills if available; otherwise your broker can obtain this)

– Business name and address

– Your desired contract start date

Telnergy will return competitive quotes from 21+ suppliers within 24 hours.

Step 4: Sign a New Contract and Give Notice

Once you have selected a supplier and signed a contract, give formal written notice to the current deemed supplier that you wish to terminate the deemed arrangement. Confirm the notice period required (typically 30 days).

Step 5: Assess the Retrospective Charge Position

Once you have a new contract in place and the immediate problem is resolved, consider whether you have grounds to challenge the deemed-period charges. The key questions are:

Were you clearly notified of the deemed rate before or shortly after supply began?
How long were you on the deemed rate, and how does the total billing compare to what you would have paid on a competitive agreement?
Does the amount involved justify the time and effort of a formal dispute?

For charges above £1,000–£2,000, Telnergy’s energy mediation service is almost always worth engaging. Our team will give you an honest assessment of the prospects for a successful challenge before you commit to the process.

Frequently Asked Questions

What is a deemed energy contract UK?

A deemed energy contract is imposed automatically on a business when it takes over premises, a new occupancy begins, or a supplier switch fails — without an explicit, negotiated agreement between the business and the energy supplier. Suppliers charge deemed rates that are typically the highest available tariff, far above any competitive market rate.

How do I know if I am on a deemed energy contract?

If you have recently moved into new business premises or if a recent supplier switch did not complete successfully, you may be on a deemed contract. Call your current supplier and ask directly whether you are on a deemed rate and from what date it applies. Also check your bills for references to “deemed supply” or unusually high unit rates.

Can I challenge retrospective deemed contract charges?

In many cases, yes. If you were not clearly notified of the applicable deemed rate within a reasonable timeframe, or if the charges represent an unreasonable premium over competitive market rates, you have grounds for a formal complaint. The Dispute Resolution Ombudsman can adjudicate on these disputes for businesses with fewer than 50 employees. Telnergy’s energy mediation service can represent you in the process.

How to avoid being put on a deemed energy contract?

When taking over new premises, obtain energy supply details from the outgoing occupant or landlord on day one, take meter readings, notify the incumbent supplier of the change, and instruct an energy broker to tender competitive rates immediately. When switching supplier, monitor the switch through to completion and act quickly if it stalls.

Is a deemed contract the same as a rolling contract?

No. A rolling contract arises when a fixed-term deal expires without renewal. A deemed contract arises from a change in occupancy or a failed switch — often without any prior relationship between the business and the supplier. Deemed rates are typically even higher than rolling rates and may be challengeable on the basis that no explicit agreement was made.

How quickly can I get off a deemed energy contract?

Once you have signed a new supply contract with a different supplier, the switch typically completes within 4–6 weeks. Notice to terminate the deemed arrangement is usually 30 days. Telnergy can tender competitive quotes within 24 hours, meaning the total time from decision to action can be extremely short.

Do Not Wait — Every Day on a Deemed Rate Costs More Than It Should

Deemed contracts are the most expensive energy arrangement a business can find itself in. They are also among the most challengeable — because unlike a rolling contract you tacitly accepted, a deemed contract is often imposed without your knowledge or explicit agreement.

Telnergy has been navigating UK business energy on behalf of SMEs for 22 years. We understand the deemed contract landscape in detail, we can get you off one quickly, and we can challenge what you have been charged retrospectively where there are grounds to do so.

Contact Telnergy today — tell us your situation and we will advise you within hours on the fastest route to competitive energy rates and, if appropriate, the strongest basis for a retrospective challenge.

Sources and References

Ofgem — Standard licence conditions for non-domestic energy supply, including deemed contract provisions: ofgem.gov.uk
businessenergyuk.com — Analysis of deemed, rolling, and out-of-contract rates versus negotiated tariffs
Energy Ombudsman — Jurisdiction extended December 2024 to businesses with fewer than 50 employees; dispute resolution for deemed contract charges: energyombudsman.org
Ofgem — Energy advice for businesses, including rules for Third Party Intermediaries: ofgem.gov.uk
Citizens Advice — Business energy rights including deemed supply arrangements: citizensadvice.org.uk
GOV.UK / BEIS — Guidance on business energy contracts and consumer protections in the non-domestic sector: gov.uk

Telnergy Limited is an independent commercial energy consultancy established in 2002, based in Christchurch, Dorset. Ofgem registered TPI · ADR Ref E3561 · CRN 04576876.