What is a deemed electricity contract?

What is a deemed electricity contract, how can you end up with such a contract, and how to get out of one. I explain the situation in which deemed energy contracts arise – they also apply to gas contracts – and what to do about it.

A deemed electricity contract applies when a business customer uses electricity, without agreeing a contract with the electricity supplier at these premises. Usually the customer and the electricity supplier will agree a contract which clearly outlines the price the supplier will charge the customer for each kWh of electricity they use (and usually a daily standing charge as well). In the absence of such a contract, the electricity supplier will charge the customer their ‘deemed rates’ which will be considerably higher per kWh than if they had agreed a contract.

The rates in deemed contracts are usually much higher than you would expect to be charged in a fixed price contract. We have seen energy companies charge businesses over 20p per kWh for electricity, and over 6p per kWh for gas. Which I think you’ll agree is quite extortionate.

Why am I on a deemed contract?

Now, if your business has recently moved into new premises, you will be charged deemed rates from the day you take over the lease. And with so much to focus on when you move premises, it is not surprising that the energy contracts are often forgotten about, which results in the energy company making an awful lot of money from unsuspecting businesses.

Another route which can lead to a deemed contract is failure to switch supplier. A business comes to the end of their energy contract, and give their energy company notice that they will be leaving and switching to another energy company. But then they forget to post the contract to the new supplier, or there might be an objection to the transfer from the current supplier, or even a mistake by the new supplier which means they can’t takeover right away.

In all these cases, the company will be charged deemed rates from the day your contract ended, until your new energy supplier takes over.

How do I get out of a deemed contract?

Here is the good news – very easily! There are no fixed end dates to a deemed contract, you can move at anytime. You can either contact your current supplier and arrange a fixed term contract immediately, or you can arrange one with another supplier. Please be aware that if you change supplier, it will take 3-5 weeks for them to register the supply, during which time you will still be paying deemed rates to your current supplier.

 

Perfect Clarity can help businesses save money on their energy and water contracts. Call 020 3372 6517 for more information.