What Is an Out-of-Contract Energy Rate — And What Does It Cost You?

Being out of contract with your energy supplier is one of the most expensive positions a business can occupy — and the majority of businesses that end up there had no idea it was happening.

Out-of-contract energy rates are a routine part of the UK energy market. They’re legal, they’re common, and they’re precisely why independent energy consultants exist. Understanding them is the first step to avoiding — or escaping — them.

What Is an Out-of-Contract Energy Rate?

An out-of-contract rate (sometimes called a deemed rate or default tariff) is the unit price your energy supplier charges when your fixed-term contract has expired and no new agreement is in place.

There is no legal cap on out-of-contract rates for business energy in the UK. Unlike the domestic energy price cap, commercial customers have no statutory protection on default pricing. Suppliers set their out-of-contract rates based on their own commercial judgement — and without competitive pressure to keep them low, those rates are typically set high.

How Much More Do Out-of-Contract Rates Cost?

Out-of-contract rates typically run 30–60% above a competitively tendered fixed-rate contract for the same site and consumption profile. In periods of elevated wholesale market pricing — as the UK experienced through 2022–2025 — the premium can be even wider.

To put that in concrete terms: a business spending £50,000 per year on energy under a fixed contract could find itself paying £65,000–£80,000 once that contract expires and it slips onto default rates. That’s £15,000–£30,000 in unnecessary expenditure for the same consumption, the same site, and the same supplier.

We see this regularly. The overpayment doesn’t require any change in your business — just an expired contract and a supplier that has no incentive to offer you competitive pricing unless you ask.

Why Do Businesses End Up Out of Contract?

The most common reasons are straightforward:

• Missed renewal windows: Most fixed-term business energy contracts have renewal windows — typically 60–90 days before expiry. Miss that window and many suppliers will auto-renew at non-competitive rates or move you to default pricing.
• No-one owns the process: In SMEs without a dedicated finance or operations team, energy renewal falls between responsibilities. Renewal dates slip. The contract expires unnoticed.
• Assuming the supplier will notify you: Some do. Many don’t — or provide only the minimum contractual notice, which is easily overlooked in day-to-day operations.
• Deliberate delay: Some businesses hold off renewing because they expect prices to fall. In a rising market, that decision is costly.

How Do You Know if You’re Out of Contract?

Look at your most recent energy bill. A fixed-term contract will show a contract end date — typically printed in the contract terms section or available through your online account. If you can’t see a fixed end date, call your supplier’s business team and ask directly: “Am I currently on a fixed-term contract, and if so, when does it expire?”

If the answer is that you’re on a deemed or out-of-contract rate, the next call should be to an independent energy consultant.

What’s the Difference Between Out-of-Contract and a Rolling Contract?

The terms overlap but aren’t identical. A rolling contract is a short-term arrangement — typically month-to-month — that the supplier has confirmed in writing. An out-of-contract or deemed rate is what applies in the absence of any formal arrangement: the supplier continues to supply energy and charges at whatever default rate applies.

Rolling contracts are marginally better than deemed rates in most cases, but both are expensive relative to a competitively tendered fixed deal. For practical purposes, the remedy is the same: go to market and fix.

Can You Claim Back Out-of-Contract Overpayment?

In most cases, no — not directly. Out-of-contract rates are contractually valid, even if they’re commercially poor. However, if you were not properly notified of your contract expiry or the applicable out-of-contract rates, you may have grounds for a complaint through your supplier’s formal process or via the Dispute Resolution Ombudsman (formerly the Energy Ombudsman).

In our experience, complaints of this nature rarely recover significant sums. The more effective approach is to resolve the situation quickly: get back into contract at competitive rates and limit the duration of overpayment.

How Quickly Can You Get Back into Contract?

Faster than most businesses expect. Working with Telnergy, a business that is currently out of contract can typically have a new fixed-rate agreement confirmed within 3–5 working days. Supply transfer to a new supplier, if required, completes within 21–28 days of contract signing.

If you want to stay with your current supplier but on competitive terms, a direct renegotiation — handled by Telnergy on your behalf — can often deliver an improved deal within 24–48 hours.

The key action is not to delay. Every month on out-of-contract rates is a month of excess expenditure that cannot be recovered.

What Telnergy Does

We have been helping UK businesses escape expensive out-of-contract positions since 2002. Our process is fast, transparent, and commercially straightforward: we tender your supply across 18+ suppliers, present a clear comparison, and manage the switch or renegotiation from start to finish.

Our fee is agreed upfront and disclosed in writing before you sign. It may be paid directly or collected via the supplier as a transparent p/kWh uplift, typically 1–2p per kWh on electricity and approximately 0.5p–1p per kWh on gas. On larger consumption and multi-site contracts, we agree a lower rate or a capped fee — a p/kWh uplift that makes sense at 50,000 kWh would be indefensible at a million, and we price accordingly. You get open-market pricing and independent advice with a free market quote — no obligation to switch.

If you’re out of contract today, the cost of waiting is measurable. Let’s fix it.

📱 WhatsApp: 07360 272168 | 📧 Email: hello@telnergy.com | 📞 Phone: 01202 028888

Telnergy Limited · Independent Energy Consultants since 2002 · Ofgem TPI Registered C35TELN01 · Christchurch, Dorset