Deemed Contracts for Business Energy: A Complete Guide
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As wholesale gas and electricity prices fluctuate over the year, it’s important for businesses to keep control of their energy costs to make sure they are getting the best deal possible. This could prove difficult if your business is stuck on a deemed contract, and you could be paying more than you need to for your business energy.
Our team of British Business Energy experts have answered some frequently asked questions, like what is a deemed contract? Are deemed contracts legal? And many more. Read ahead to learn more about how a deemed tariff could affect you and your business.
What Is A Deemed Contract?
A deemed contract is usually the energy supplier's most expensive tariff and is applied when you move to a new business premise or the premise has no tenant and a new energy contract isn't negotiated.
The Electricity Act 1989, states “Where electricity is supplied otherwise than in pursuance of a contract, the supplier shall be deemed to have contracted with the occupier (or the owner if the premises are unoccupied) for the supply of electricity.” The Gas Act 1989 also has a similar statement.
The legislation above shows that liability is placed on the occupier or owner if the premises are unoccupied. This is solely their responsibility and no liability is placed on the tenant who has left the premises, regardless of whatever lease remains in place.
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Why Is My Business On A Deemed Tariff?
Deemed contracts are usually entered into when a business moves into new premises and consumes gas or electricity before agreeing to a contract with an energy supplier.
If your energy deal comes to an end and you haven’t agreed on new rates or switched suppliers, you will likely be moved to deemed rates.
Are Deemed Contracts Expensive?
According to Ofgem, in comparison to a negotiated contract rate, deemed energy contracts are much more costly. Microbusinesses could find themselves paying rates 80% higher than negotiated deals on a deemed energy contract. This means that they will be paying far too much for the gas and electricity they are using.
Is A Deemed Contract Legal?
Yes - deemed contracts are legal. Despite the premises being unoccupied, they are still using some electricity, like the alarm or security system. It’s a good idea to agree to a fixed-term contract regardless of tenants, to avoid the inflated fees found on a deemed tariff.
In addition to the premise using some electricity, there will also be standing charges and maybe a capacity charge (a fee to make sure there is enough electricity in the system) - this charge could be based on historic consumption and not reflect the live usage.
Are deemed contracts enforceable?
Yes - By law, a deemed contract for energy is enforceable and the occupier or owner is required to pay it, irrespective of whether you used any energy before finding a new supplier.
What Should I Do If My Business Is Switched To A Deemed Contract?
If your business is currently on a deemed energy contract, it’s important to switch business energy as soon as possible.
As there is no exit fee to pay to your supplier, you can switch free of charge at any time. This could see your business make real savings on your energy bills.
When you compare with British Business Energy, you can quickly view the latest prices from our panel of trusted business electricity and business gas suppliers.
Starting your switch is easy, simply provide your business postcode and select the type of energy you’d like to compare prices for. You can find the latest business energy quotes here.
Should I Stay On A Deemed Contract?
Our British Business Energy experts express that you should move from a deemed contract as soon as possible, so you are paying more affordable rates and securing yourself better savings over your contract. There’s more logic in negotiating a better contract rate with either the same supplier or a different one.
When Can I Leave A Deemed Contract?
The good news for businesses on a deemed contract is that they can switch suppliers at any time without a fee. Your energy supplier cannot prevent you from switching for any reason or require you to give notice when you switch.
Your supplier must also take all reasonable steps to provide you with the Principal Terms of your deemed contract including your charges and fees. They will also be required to inform you of other contracts available and how you can get information on these.
How Can I Avoid Being Switched To A Deemed Contract?
Under rules introduced by the energy regulator Ofgem, energy suppliers are now required to provide micro businesses with renewal letters detailing their current prices, renewal prices, and current energy consumption.
If you run a micro business, your supplier is required to provide a renewal letter under rules introduced by the energy regulator Ofgem. This should detail your current prices, your renewal price, and your current energy consumption.
However, energy suppliers are not yet required to provide this information to larger businesses. As a result, it’s vital that your business is aware of your renewal date and when your contract is coming to an end. All of this information should be included in your latest energy bill or in your energy contract.
If you do receive a renewal letter, it’s worth keeping in mind that your renewal prices will rarely be the best rates available. Comparing the latest energy prices allows you to switch to the best deal possible when your current contract comes to an end.
By switching to British Business Energy, you can receive renewal reminders including a range of tariff options from our trusted suppliers. Our goal is to ensure that your business stays on the right business energy tariff and that you’re never left overpaying for your gas and electricity.
What Happens If I Allow My Contract To Roll Over?
If you simply allow your contract to roll over, you will likely be placed on an expensive standard tariff by your supplier. These terms can be 50% higher than negotiated contracts and unlike a deemed contract, you may face an exit fee for switching early.
For any business approaching the end of its energy contract, it is vital to compare the latest energy prices to avoid being stuck on expensive rates.
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