How to Avoid Out-of-Contract Electricity Rates

Many businesses are unknowingly paying significantly more for their electricity or gas than they need to. According to Ofgem's own research, this is despite most business owners believing they understand their energy contract. When a fixed-price deal ends, suppliers will often move customers straight onto an out-of-contract rate - and among businesses whose contract had recently ended, around a third ended up on one of these default rates, which can run up to 40% higher than an equivalent fixed contract.

Businesses moving into new premises are especially at risk, as they're often unaware that an incumbent supplier is entitled to charge these elevated "deemed" rates until a proper contract is agreed.

What Are Out-of-Contract Electricity Rates?

When your business's fixed-price electricity contract comes to an end, your energy supplier will continue to supply power but will automatically move you onto a default tariff, known as an out-of-contract rate. Some suppliers now give these tariffs confusing names which make them sound like their fixed contract counterparts by referring to them as ‘plans’ and giving them end dates, so always be sure to check thoroughly.

Here is usually what happens:

• Fixed contract ends - your supplier will typically write to you 60 days before your contract end date to inform you of your options once the agreed comes to an end.

• The supplier places your business onto a default tariff - If you take no action you will move on to the prevailing out of contract tariff for your meter type once your contract ends. This happens automatically, often without any active notification.

• You don’t get to choose - unlike a fixed deal, you have no say in the tariff or its suitability for your business.

• It's usually one of the highest tariffs available - because there's no price cap on business energy (unlike domestic tariffs) and no competitive pressure once a customer is already "captured," out-of-contract rates sit well above what a competitively negotiated fixed contract would cost.

The result is that a business can end up paying substantially more per unit of energy than it needs to - often without realising it, since the bill still comes from the same supplier and looks much like it always has. The only real giveaway is a jump in the unit rate on the invoice.

What Happens If You've Already Been Left on Out-of-Contract Rates?

Being placed on out-of-contract rates doesn't always mean the supplier has acted incorrectly. However, if there have also been billing errors, ignored meter readings or communication failures, it's worth having the account reviewed.

In one recent case, we helped a Northamptonshire farming business challenge years of incorrect billing after receiving a £140,000 electricity bill. Following a detailed investigation, we secured corrections worth more than £76,000.

How Clear Utility Solutions Helps Businesses Avoid Out-of-Contract Electricity Rates

Since 2018, Clear Utility Solutions has been looking after business energy for thousands of clients. We keep track of the important dates so our clients don't have to, comparing the market and switching them onto a new deal before the old one ever has the chance to lapse.

We can help with:

Contract Renewables

We track renewal windows and open the conversation early, well before a contract expires, so there's time to agree new terms and make sure they are right for your business before a single day is spent on an out-of-contract rate.

Comprehensive Market Comparisons

We compare pricing across the UK's major suppliers to find the deal that fits the business, and explain each offer in plain English, no jargon.

Energy Procurement

Once a direction is agreed, we handle procurement start to finish: paperwork, supplier liaison, and timing the switch to make sure it goes smoothly, so business owners can stay focused on running the business.

Ongoing Monitoring

We keep an eye on contract end dates, usage trends, and market conditions in the background, so renewal decisions happen proactively rather than after a rate has already reverted to default.

Billing Dispute Resolution

If the worst happens and you find yourself on the wrong end of an out-of-contract bill, we step in. We will validate the bill for incorrect charges, back-billing and meter read errors, we deal directly with the supplier to investigate and resolve it, rather than leaving clients to navigate a call centre alone.

Supplier Management

Beyond the switch, we want to stay the ongoing point of contact between our clients and their suppliers, handling queries and paperwork, and negotiating directly with an existing supplier where that's the better outcome. So please get in touch if you need help.

If a contract is due to expire, or a bill looks like it might already be on a deemed rate, getting in touch with Clear Utility Solutions is the first step toward fixing it.

FAQ's

Can I switch if my contract has expired?

Yes. Once a contract has ended, there's nothing tying you to your current supplier, so you're free to compare the market and switch whenever suits you, provided your account has no due debt accumulated under a contract.

What happens when an electricity or gas contract ends?

If a new contract isn't agreed before the end date, most suppliers move the account onto an out-of-contract rate automatically however, suppliers are obligated to write to you beforehand to inform you of your new rate. 

What's the difference between out-of-contract and deemed rates?

From a tariff perspective, they're often similar, but the real difference is in when each applies and how Ofgem's rules treat them. A deemed rate applies when a new entity takes on responsibility for a supply, most commonly when a business moves into new premises, and in that situation, suppliers aren't allowed to object to a switch on the grounds of debt. An out-of-contract rate applies at the end of an existing contract, and there, suppliers have more scope to object if there's debt on the account.

Are out-of-contract rates more expensive?

Usually, yes. Out-of-contract and deemed rates aren't negotiated, so they tend to sit well above the rates available on a fixed contract, sometimes considerably so.

Can I challenge incorrect electricity bills?

Yes. If charges look wrong, whether that's a bad reading, a backdated adjustment, or an unreliable meter read, you can raise a dispute directly with the supplier. We handle this on our clients' behalf, so they don't have to deal with a supplier's call centre themselves.

Should I submit meter readings?

Yes, regularly, and especially around a switch or a change of tenancy. Accurate readings keep bills based on real usage rather than estimates, and they help avoid disputes further down the line.

Can I switch suppliers while on out-of-contract rates?

Yes. There's no fixed term to work around on a deemed rate, so you're free to move to a new contract as soon as you find a better deal, often more quickly than switching out of a fixed contract as long as your account is not in debt where the debt was accrued under a contract.

How early should I renew?

As early as possible, ideally you should start to look at pricing 12 months out from your contract end date although you may decide to wait for the market to change before making a final decision.

Can you negotiate with my current supplier instead of switching me?

Yes. Where that works out better for the client, we'll negotiate directly with the existing supplier rather than defaulting to a switch. The goal is the best outcome, not a switch for its own sake.