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. Read our out of contract and demeed tariffs explained guide for more information.

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 electricity rates?

Being placed on out-of-contract electricty 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 can Business Energy Consultants help Businesses avoid out-of-contract Electricity Rates

A business energy consultant can take care of the process, helping businesses understand their options, compare the market and manage their energy contracts from renewal through to ongoing supplier management.

Business energy consultants can help with:

Contract Renewals

A consultant can track contract renewal windows and start the conversation early, giving businesses time to review their options before an existing contract expires. This can help avoid the disruption and potentially higher costs that can come with allowing a contract to roll onto an out-of-contract or deemed rate.

Comprehensive Market Comparisons

Energy consultants can compare offers from across the UK's major business energy suppliers, helping businesses understand how different prices, contract terms and suppliers compare. They can also explain the options in plain English, without the jargon.

Energy Procurement

Once a business has decided which option is right for them, an energy consultant can manage the procurement process from start to finish. This can include handling paperwork, liaising with suppliers and coordinating the switch, helping to make the process as straightforward as possible.

Ongoing Energy Management

Energy management doesn't necessarily stop once a new contract has been agreed. Consultants can help businesses keep track of contract end dates, changing usage and market conditions, so important decisions can be made proactively rather than at the last minute.

Billing Support and Dispute Resolution

Energy bills aren't always straightforward. Where there are concerns about incorrect charges, back-billing, meter readings or other billing issues, an energy consultant can help investigate the problem and communicate directly with the supplier to work towards a resolution.

Supplier Management

Having a dedicated point of contact can make dealing with energy suppliers considerably easier. A consultant can handle queries, paperwork and supplier communications on a business's behalf, and can negotiate with an existing supplier where staying with them is the right option.

How Clear Utility Solutions can help

At Clear Utility Solutions, we've been helping businesses manage their energy since 2018. We've looked after the business electricity requirements of thousands of clients, helping them navigate the market and manage the practical side of their energy contracts.

We don't believe business energy should be something you only think about when a contract is about to expire. We keep track of important dates, monitor the market and help clients understand their options before decisions need to be made.

Whether you need help finding a new electricity or gas contract, reviewing your current arrangements, dealing with a supplier or resolving a billing issue, our team can manage the process for you. Speak to one of our energy experts.

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. View the suppliers we work with