Deemed contracts: what they are and how to get off deemed rates

A deemed contract is the supply arrangement the law creates when a supplier supplies your premises without a contract in place. The prices, called deemed rates, are set by the supplier, and you can leave at any time without an exit fee or notice.

If your business is using gas or electricity and you never agreed a contract for it, you are almost certainly on a deemed contract. It is legal, it keeps your supply running, and it is usually an expensive way to buy energy.

What is a deemed contract?

A deemed contract is a contract that exists because the law says it does, not because you signed one. Two pieces of legislation create it:

• Electricity: paragraph 3 of Schedule 6 to the Electricity Act 1989 says that where a supplier supplies premises “otherwise than in pursuance of a contract”, it is deemed to have contracted with the occupier, or with the owner if the premises are unoccupied.
• Gas: paragraph 8 of Schedule 2B to the Gas Act 1986 does the same for gas, from the time the supplier began supplying you.

Each supplier must write a “scheme” setting out the terms of its deemed contracts, and can revise it. For gas, the supplier has to publish a notice of its scheme and send a copy to Ofgem, Citizens Advice and Consumer Scotland.

So even though you never agreed prices, you are liable to pay for the energy you use at the supplier’s deemed rates.

When do you end up on a deemed contract?

There are four common routes:

1. You move into premises and start using electricity or gas before agreeing a contract. Ofgem says a deemed contract will normally exist in this situation.
2. You start a new business at a site and the energy keeps flowing from whichever supplier served the last occupier.
3. Your old contract ends and does not say what happens next. Ofgem’s guidance says a deemed contract is likely where the contract has no renewal terms, you or the supplier have made clear the contract should not continue, and you keep using energy.
4. Your supplier goes bust. The replacement supplier Ofgem appoints puts you on a deemed contract until you choose a deal.

If your old contract does say what happens at the end, you are usually on out-of-contract rates instead. That is a different thing, covered in our guide to out-of-contract rates.

Why are deemed rates so high?

Citizens Advice describes deemed tariffs as “usually the most expensive tariffs”. Ofgem accepts that suppliers can build extra costs and risk into deemed rates. Its guidance gives examples:

• bad debt and the risk of non-payment
• poor credit
• the supplier has had no contact with you yet
• the supplier cannot predict how much you will use, so it cannot buy (hedge) your energy in advance

Deemed rates also vary. Ofgem expects suppliers to set different deemed rates for different groups, such as microbusinesses, SMEs, larger users, and half-hourly or non-half-hourly meters.

Example of a published deemed rate: PE Solutions publishes a single-rate electricity price for out-of-contract and deemed customers of 45p per kWh and a standing charge of 150p per day, excluding VAT, effective from 1 March 2026. To see how that compares with what businesses pay on average, check our business energy prices page, which updates as new government figures come out.

What are Ofgem’s rules on deemed rates?

Suppliers must take all reasonable steps to make sure the terms of their deemed contracts are not unduly onerous. This is standard licence condition (SLC) 7.3 of the gas and electricity supply licences.

SLC 7.4 sets out one way terms will be unduly onerous. In plain terms, it is where the supplier’s revenue from deemed customers:

• significantly exceeds its costs of supplying them, and
• exceeds those costs by significantly more than its margin on non-domestic customers in general.

What Ofgem’s 2023 guidance adds

Ofgem published guidance on deemed contracts on 6 November 2023. The key points for you:

• “Significantly exceeds” means the deemed rate is much higher than an equivalent contracted rate, and the gap is not justified by the extra cost of serving deemed customers.
• Ofgem compares a supplier’s deemed rates with its own contract rates, not with other suppliers’ rates.
• Suppliers should review deemed rates regularly. Ofgem thinks at least once a quarter is appropriate in most cases, and more often, such as monthly, when markets are volatile.
• Setting deemed rates high to push customers onto contracts is not a valid justification.
• Suppliers should have up-to-date deemed rates that are easy to find, for example on their website.

Other protections on a deemed contract

The supply licence also says a deemed contract must not:

• have a fixed term
• include a termination fee
• require you to give notice before you change supplier

Your supplier must also take reasonable steps to send you the principal terms of your deemed contract, and to tell you that contracts with different terms may be available. Where it has to estimate how much you used, it must act reasonably and take account of the consumption data available for the premises.

Does Ofgem enforce the rules?

Yes. Ofgem can take enforcement action, including penalties of up to 10% of a supplier’s turnover. Two recent examples:

• On 25 September 2023 Ofgem opened an investigation into whether BES, now trading as Ruby Energy, was taking all reasonable steps to make sure its deemed contract terms were not unduly onerous. It widened the investigation on 23 September 2025 and says the investigation does not mean it has made any findings.
• In December 2024 Maxen Power paid £1.65 million into the Energy Industry Voluntary Redress Fund. Ofgem said Maxen’s evidence demands at change of tenancy risked keeping tenants on more expensive deemed rates.

You can read more about these suppliers on our Ruby Energy and Maxen Power pages.

How do you get off a deemed contract?

You get off a deemed contract by agreeing a proper contract, either with your current supplier or a new one. Because a deemed contract has no fixed term, no exit fee and no notice period, you can do this at any time.

1. Find out who supplies you. Any bill or letter from the supplier will name it. If you have nothing, our change of tenancy guide explains how to find the supplier at a property.
2. Find your meter numbers. Your electricity MPAN and gas MPRN identify your supply points.
3. Take dated meter readings, ideally photos, so you only pay for what you used.
4. Tell the supplier you are responsible for the premises, with evidence such as your lease. Ofgem’s change of tenancy guidance says suppliers should review this within 10 working days.
5. Get quotes. Ask your current supplier for a contract price and compare it with other suppliers. You can compare business energy quotes with us.
6. Agree a contract. If you switch, Citizens Advice says the switch should happen within 5 working days.

Your deemed contract carries on until supply under your new contract starts, so there is no gap in supply.

Should you just stay on the deemed contract?

Usually not for long. It suits a short stay or a period while you work out how much energy the site uses. But because you are paying the supplier’s deemed price for every unit and every day, the cost can add up quickly on a busy site.

How can you avoid a deemed contract?

• Arrange a contract before you move in. Citizens Advice recommends having a contract in place before you move, so you know the prices and any connection costs.
• Tell the supplier about the move straight away, with meter readings and proof of the change of tenancy.
• Watch your contract end date. If your contract has no renewal terms, you could land on deemed rates when it ends. Our contract renewal guide explains what to do and when.
• Check any rates you are sent. If a supplier writes to you about deemed rates, compare them with a contract price straight away.

Deemed contract at a glance

Question	Deemed contract
Do you sign anything?	No, the law creates it
Who sets the price?	The supplier, through its deemed contract scheme
Fixed term?	Not allowed
Exit fee?	Not allowed
Notice to switch?	Not required
Price cap?	No, business energy is not capped
Ofgem price rule	Must not be unduly onerous (SLC 7.3)

If you think your deemed rates are unfair, complain to the supplier first. Our business energy complaints guide covers when you can take it further.

Frequently asked questions