Out of Contract Energy Rates: What They Cost Your Business

Your fixed contract ended three months ago. Nobody rang. Nobody wrote. And your unit rate quietly doubled.

That’s out of contract rates — the most expensive electricity most businesses will ever buy, and the easiest cost to avoid. In twenty-plus years of auditing business energy bills, finding a meter on deemed rates is one of our most common discoveries — and the business almost never knows.

What are out of contract rates?

When a business energy contract expires without a renewal or switch in place, the supplier moves you onto their out of contract tariff. A close cousin, deemed rates, applies when you move into premises and inherit the supply with no contract at all. Both are variable rates set at the supplier’s discretion, published in their standard terms — which nobody reads until it’s expensive.

Typical difference on a small commercial meter in mid-2026:

	Competitive contract	Out of contract
Unit rate (p/kWh)	24–28p	40–55p
Standing charge (p/day)	60–90p	150–250p

Check your own supplier’s published deemed rates against your last contracted rate — the gap is rarely less than 50%.

Why suppliers charge so much

Partly risk: the supplier can’t hedge your usage if it doesn’t know how long you’re staying, so you’re an unpredictable liability on their book. And partly, frankly, because inertia pays. Ofgem requires deemed rates to be published and not unduly onerous — but “not unduly onerous” and “competitive” are very different standards.

Who ends up on them

• Businesses that missed a renewal deadline or termination notice window
• New occupants of premises who never contracted for the inherited supply
• Multi-site operators with one forgotten meter — the classic portfolio leak
• Businesses mid-dispute or awaiting a change of tenancy to process

How to get off them

1. Check the contract status of every meter today. Your bill will say “out of contract”, “deemed” or show a variable rate where a fixed one used to be.
2. Get comparable quotes before ringing your current supplier. Their retention desk prices differently when you have alternatives.
3. Contract properly, terminate properly. Out of contract supply needs no notice period to leave — a new contract can usually start within days. But check the new contract’s own termination terms so you’re not back here in a year. Our renewal guide covers the diary discipline.

One misconception worth killing: you cannot be “blocked” from switching while out of contract, though a supplier can object over unpaid debt. Clear any arrears and the switch proceeds.

The real cost of waiting

A 40,000 kWh site paying 20p/kWh over the odds burns roughly £8,000 a year in avoidable cost — about £22 every day the situation continues. Deemed rates don’t punish you once; they punish you daily.

If you’d like us to check your contract position, it’s part of our standard review — fee agreed upfront, and if there’s nothing wrong, you’ll be told exactly that.

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Johnny Arthur runs Telnergy Ltd, an independent commercial energy consultancy established in 2002 and based in Christchurch, Dorset. Ofgem registered TPI, ADR Ref E3561, CRN 04576876.