In this piece, we’ll explore both of these factors and explain how you can save money by avoiding these rates wherever possible with Business Energy Comparison.
Out Of Contract And Deemed Rates
Out of contract and deemed rates can be incredibly expensive – unfortunate but true. You might wonder why you have to pay them and why they’re so costly.
If you want to find out if your business energy supplier is overcharging you, then you can compare your rates with us at Business Energy Comparison. We can provide you with free quotes and compare business energy suppliers.
What Are Out Of Contract Rates?
Out of contract rates apply to customers that don’t have a fixed-term contract in place. These rates are often incredibly expensive, as they encourage customers to seek out contracts to save money.
While these rates are expensive, you will have no choice but to pay them until you secure a new contract.
What Are Deemed Tariff Rates?
Deemed rates are similar to out of contract rates, although they apply to businesses. If your business is paying deemed rates, it will be because you are yet to agree to a contracted deal with your new supplier.
Deemed rates are normally only applied to customers who have never had a contract with their current supplier. This is why these rates will generally only apply if you are dealing with a new supplier.
Your business will be subjected to these expensive rates until you secure a new contract.
How Much Are Deemed Tariff Rates?
There is no real set price for deemed rates, and the amount you pay will differ from one supplier to the next. Without an energy contract, your business could end up paying double or quadruple the average market rate for energy.
While a standing charge will usually cost a business around 25p per day, deemed contract customers can end up paying up to £1 per day in standing charges.
Your unit rate will also increase, as most contract customers pay around 13p/kWh, while those on deemed contracts can pay up to 40p per hour.
The energy consumption of the average business is about 40,000kWh of electricity per year. This adds up and could end up costing your business thousands in unnecessary bills.
Is A Deemed Rate The Same As A Variable Tariff?
No, deemed rates and variable tariffs are actually quite different. A business will be placed on deemed rates if it has not set up a contract with its current supplier. These deemed rates will then be automatically applied until a new contract is agreed to.
Variable tariffs are contracts that require businesses to pay the going rate for energy on the energy market. This means that if the price of electricity goes up, the business will need to pay for electricity at this rate.
Variable tariffs are deals chosen by businesses that are willing to take the risk of rising prices in the energy sector. This is because the prices can also sometimes drop below contract rates, so there are also some benefits to variable tariffs.
Some of the other benefits that variable rate contracts offer include:
- There are no exit fees.
- You can leave your contract and switch to a new contract at any time.
Why Has My Business Been Placed On Out Of Contract Rates?
Your business could be placed on deemed rates for a few different reasons.
- If your current contract expires and you don’t take out a new one before it ends, you will have to pay deemed rates.
- If your business moves to new premises, and you haven’t made any arrangements to secure a contract with your new supplier.
If you terminate your contract with your existing supplier and don’t take any further action.
How Can I Avoid Being Put On Out Of Contract Rates?
The best way to avoid out of contract and deemed rates is by keeping an eye on the contracts you have and when they might expire. You should also take note of any letters or emails you receive from your energy supplier, as they could pertain to your contract expiring soon.
If you know when your contract expires and you are aware of when your renewal period is, then this can help you avoid paying out of contract rates.
The best time to secure a new contract is during your renewal period, as you won’t need to pay any fees for cancelling your contract early. During this period, you can switch to a new supplier, or you can try and secure a better deal with your current supplier.
Out of contract rates are much more expensive and can and should be avoided at all costs if you don’t want to face unnecessary expenses.
Why Are Deemed Rates More Expensive?
Energy suppliers don’t just make deemed rates more expensive to force customers into contracts, as they have a few good reasons for this.
Deemed rates are more expensive, as suppliers buy their energy in advance and use their customer’s contracts to determine how much to buy.
If a lot of a supplier’s customers are on deemed rates, then they will have no idea how much energy they will need to purchase to meet the demand.
Suppliers make these rates expensive to discourage customers from staying on deemed contracts. Deemed rates are also more expensive and are used to penalise customers owing money to their supplier. Customers are also penalised if they don’t pay their accounts via direct debit.
Customers that don’t pay via direct debit also cost suppliers more money, so they charge expensive rates to compensate for this.
Another reason deemed rates more expensive is because out of contract customers can leave at any time. These customers will also not face any penalties for switching suppliers, as there is technically no contract in place. This unexpected loss of a customer also costs suppliers money, so they need to make up for this.
What Happens If I Don’t Pay Deemed Rates?
If you are on a deemed contract and don’t make payments, then you will face the same consequences that contract customers do.
If you miss payments from your deemed contract, you will become indebted to your supplier. If this amount accumulates significantly, then your energy supply could be cut off completely. This is not common, so your account will need to be seriously in arrears for this to occur.
Your supplier should notify you long before this occurs, though, so it would be best to pay your bill and secure a contract.
Final Thoughts
If your business is currently on a deemed contract, and you want to find a new supplier to save some money, contact Business Energy Comparison today.
We can provide you with free quotes from the best energy suppliers in minutes. This will help you avoid paying for expensive deemed rates as we compare business gas and electricity prices to secure the best deal for your business.
Frequently Asked Questions
Do you have to cancel a deemed contract?
No, you don’t need to cancel a deemed contract if you plan on switching to a new contract. Your deemed rates will fall away automatically once you secure a new contract, just as they were applied automatically when you were out of contract.
How long can you stay on a deemed contract?
You can continue paying deemed rates for as long as you want, although this is not advised as they are much more expensive.
Deemed contracts are considered to be rolling contracts, as, after 28 days, they expire. After your deemed contract has expired, you will move to a new deemed contract that could be even more expensive. This will depend on the energy prices at the time your contract expires, though.
What happens if I use less energy than my fixed tariff?
Fixed contracts don’t cause you to pay the same for gas and electricity every month. The “fixed” part of your contract applies to the price you pay per unit for energy. This means that if you use less energy, you will pay less for your bill.
Is it cheaper to stay on a variable tariff?
Not necessarily. While variable tariffs will allow you to benefit when energy prices are low, you will need to pay more when prices rise.
Variable tariffs are slightly unpredictable, so if you are worried about the price of your energy bill, a fixed contract would be best.
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