Deemed contract
A deemed contract is created when you use gas or electricity at premises without having agreed a contract.
What it is
If you move into premises and use energy without agreeing a contract, the supplier can place you on a deemed contract. It exists so supply continues, but the terms are set by the supplier and the rates are typically higher than a negotiated fixed deal.
Where you will see it
- On a welcome letter from the supplier after you move in.
- On bills that mention "deemed" or "default" rates.
- After a fixed contract ends, when it moves to an out-of-contract rate. See out of contract rate.
Why it matters
Rates can change more often, and you can choose a contract at any time. Under Ofgem rules there is no termination fee for leaving an out-of-contract or deemed arrangement, and suppliers cannot require a microbusiness to give notice, except under an evergreen contract, where notice is up to 30 days. That means you can usually switch quickly. Our guides to moving premises and deemed contracts and how to get off them give the steps.
Example
A new tenant uses 15,000 kWh a year. One comparison site reports an average out-of-contract price of 40.0p/kWh against 28.4p for microbusiness fixed rates (21 October 2026, indicative). The gap is 11.6p, so 15,000 x £0.116 = £1,740 a year in units alone. Try the out-of-contract cost calculator.
Related terms
Common questions on this topic
- Why has my business energy price risen at renewal?
- What happens if I don't renew my business energy contract?
- How do I find my business energy contract end date?
- How far ahead can I agree a new business energy contract?
- What is a rollover contract and how long can it last?
- Is a phone agreement a legally binding business energy contract?
Sources
General information only. Energy prices, rules and supplier terms change; check the latest position with your supplier, Ofgem or the Energy Ombudsman before you act.