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Last updated: 28 January 2021
As a business owner, keeping your energy bills low should be a priority. For many businesses across the UK, it’s one of a company’s biggest outgoings. So, it’s important to keep on top of your contract to make sure you’re getting the best energy deal
possible. If you fail to renew your contract before its end date, you will be put onto ‘out of contract’ rates, which can end up costing your business a lot more than you expect. Being on a deemed contract is slightly different but may apply to you if you’ve recently moved into new business premises. Read on to find out more about out of contract rates, and how and why they should be avoided.
What are out of contract energy rates?
When the energy contract between you, the customer, and your energy supplier
comes to an end, no new or alternative rate is put in place. Instead, when a gas or electricity contract expires, the rates you pay for your energy are changed to a default charge. This default charge is the out of contract rate.
Business energy customers like yourself are charged at the out of contract rate until a new energy deal
is agreed on, you move out of your current premises or you switch to a different supplier. The default energy rate is typically more expensive than contracted rates, so you should move off of this rate as quickly as possible to avoid unexpected energy costs.
- Your daily standing charge (£/day) which covers third party distribution charges, metering costs and administration costs.
- A unit rate (pence/KWh) which is what you are charged per actual or estimated unit of gas or electricity you use.
- A capacity charge, which is only paid if you are a half-hourly electricity customer, to cover third party distribution charges.
With most business energy suppliers
, you have until your notice date (30 days before the end of your fixed period contract end date) to let them know what you’d like to do. The best way to avoid out of contract rates is to make a note of when your notice date is, and either switch suppliers or set up a new contract with your current one. Most business energy deals
last about four years, so it can be difficult to keep on top of things. Perhaps try adding an annual reminder to your calendar, or if you use a digital calendar then you should be able to set up a notification several years in advance.
How is a deemed contract different to being out of contract?
You are on a deemed contract if both gas and electricity are being supplied to your premises and you are using one or both of these products, without entering into a formal agreement to do so. For example, if you have just moved to a new property and are using the existing supplier.
This happens because of UK legislation covering energy supply. It stipulates than when you take over responsibility of a property, you’re assumed to have entered into an agreement with the registered energy supplier for that property. This means that the energy supplier has to provide you with electricity when you move into the premises, and that you’ve got to pay for that energy at that supplier’s published default rates. You have to pay this default rate until you’ve negotiated a new contract.
If this applies to you, then you’re being charged default rates, just like someone who is out of contract. And just like them, you’re probably paying for your energy at a higher rate than you need to. Therefore, you should seek to form a contract with the supplier that you’re using, or with a new supplier entirely. Always compare business energy
deals before entering a new contract, to make sure you’re getting the best value possible.
I’m out of contract and want to switch supplier. How can I do this?
Unlike for domestic energy
, it’s not too easy to change to new energy rates as a business. All business tariffs are fixed for at least 12 months. If you’ve found yourself out of contract, it’s a great time to compare business energy deals
, as you can make the switch immediately. Of course, you will want to do this as quickly as possible to avoid paying the pricey default charges for too long.