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7 Dec

Deemed Contracts: Guide for Businesses

by Simon Thompson
 

Money is tight for everyone at the moment, so no-one wants to be overpaying for business electricity. It may surprise you to learn, then, that many businesses are missing out on potential savings due to deemed energy contracts.

What is a deemed energy contract?

A deemed contract is the name of the contract that is put in place by the business electricity supplier when a business moves to a new premise and begins consuming electricity before they have agreed to a contract.

Businesses may also move onto a deemed contract if their existing contract ends, and they continue to consume electricity. This can happen if a contract expires and the business hasn’t realised, or when the contract is terminated early (by either the business or the supplier).

How much do deemed contracts cost?

Deemed contracts tend to cost a lot more than tariffs that have been negotiated. For example, micro-businesses can end up paying 80% more on a deemed contract than on a negotiated contract.

Research has shown that around 10% of micro-businesses are currently on deemed contracts, which means they are paying way more than they need to for their business electricity.

What happens if you allow your contract to roll over?

If you allow your business electricity contract to roll over, you will more than likely be placed onto a more expensive standard tariff – which can be 50% more expensive than negotiated contracts. You may also face an exit fee if you decide to switch early.

If your business is reaching the end of its energy contract, it is vital that you compare the latest prices. Delaying taking action on this can leave you stuck on expensive rollover rates.

What are your rights if you are on a deemed contract?

If you discover you are on a deemed contract, then don’t worry, you still have the right to switch supplier without paying a fee. If you are on a deemed contract, your business electricity supplier cannot:

• Ask you to give notice before terminating the contract

• Charge you a termination fee

• Prevent you from switching for any reason at any time

Your electricity supplier must take all reasonable steps to provide you with the Principal Terms of your deemed contract if you request it – including all charges and fees.

If you are on a deemed energy contract, you should compare business electricity rates and switch to a better contract as soon as possible.