Deemed Rate Energy Contracts
If you move into premises supplied by an energy company with which you have not agreed on a new contract. You will be placed on a “deemed rate” energy contract. This will continue until you and the energy company agree on a new contract or ends the tenancy agreement. This deemed rate contract is based on standardised tables and is dependent on the amount of usage. It will generally be more expensive than a standard fixed term contract. However, there are no penalties for ending this deemed rate contract early if you give the energy company adequate notice.
If you would like to read more information or learn more about the pricing of business energy, you can do so here.
So, how does an energy company decide on a deemed rate contract?
Your energy company will first do when agreeing on a new contract to send you a comparison rate and terms and conditions. This will outline what will happen if you don’t opt for a new contract with the energy company. If you don’t respond within 30 days, you will automatically be put on a deemed rate contract that could be more expensive than the standard rate on a fixed or variable contract. The deemed rate tariff will be an estimate calculated on average consumption figures.
It is possible that if your usage differs significantly from the estimated consumption, the actual cost may differ substantially from the estimated cost. Suppose there is a significant difference between the highest and lowest usage. In that case, it may be necessary to review your contract at different points during the year to ensure you are getting the best deal possible.
How can you avoid being put on a deemed rate contract?
To avoid being on a deemed rate contract, you should contact your energy company within 30 days of moving into new premises to discuss your current account and tariff. If the energy company doesn’t get in touch with you, you can request a review of your account by visiting their website or contacting them on their customer services line.
It is essential to know when the deemed rate period ends. If you haven’t chosen to move onto another fixed rate when this period is up, you risk being automatically put on another deemed rate contract at the end of your tenancy agreement. It is your responsibility to notify the energy company that you want to move on to another tariff.
What are the benefits of being on a deemed rate contract?
Being on a deemed rate tariff often offers an excellent opportunity to search for the best rates on the market. Since it is possible to switch at short notice, customers often find themselves shopping around for the best contract in this period. For this reason, it is a great time to speak with your energy provider and negotiate the best possible rate as you will find you have increased bargaining power.
If you are thinking of switching suppliers, remember that the switching process is not instant. There are some circumstances when you are required to give notice to your energy supplier at least 15 days before your new contract starts. This will vary on a case by case basis, and it is advised that you contact your energy company to check if there are any clauses regarding this.
Things to remember
If you do decide not to move onto a new contract, remember, if you’ve chosen not to move onto a new contract with your energy company by the time the deemed tariff period expires. The deemed tariff period will automatically renew at the end of your tenancy agreement without any further notice needing to be given by you. The energy company will then be able to switch the clock back on the deemed rate period at any time without having given any prior notice or explanation.
If you have been on a deemed rate contract with the energy company for more than three years, it may be possible to request a tariff review from the energy company. This will typically only be granted if the energy company agrees that a review is necessary and at a reasonable cost. A tariff review might also be needed if your usage varies significantly from the average consumption figures that provide you with a deemed rate tariff. You can find out more about your right to request a tariff review on the energy companies’ website or contact their customer services department.
The energy company will review your usage during the deemed rate period. They will then check to see if you advise them of any changes that would affect your usage. If they are not advised of these changes, they can ask you to provide evidence to show this. If your usage is very different from the estimated consumption, you will be compensated by having your previous tariff reviewed at no extra cost or penalty. Of course, if it is decided that you are aware of the difference in consumption and it would have cost more not to take action earlier, you could end up paying more than the standard annual tariff (which is based on average consumption).
If your tenancy agreement is due to expire, remember that there is no penalty for cancelling a fixed or variable rate contract early as long as you give adequate notice. You should also check what happens if your tenancy agreement ends before its termination date. This is because if you have not also chosen to move onto a new contract, you may be required to pay the energy company the difference between the standard tariff and the deemed rate tariff until your subsequent tenancy agreement is up. If you are not on a deemed rate contract, this could amount to thousands of pounds over the length of your tenancy agreement.
If you are concerned about how this might affect you, speak to the energy company at least 30 days before your tenancy agreement ends. They will then advise you on whether it is best to continue with the same tariff if the price has risen or if it is better to change supplier. If there are no changes in your circumstances, you will not be required to give notice of your contract expiring, and you will continue on the deemed rate tariff until your following tenancy agreement begins. You can read more about deemed rate contracts here.
Other useful links about Business Energy
5 Products and Services Dual Energy Can Provide for Your Business
Switching to Scottish Power
What is a Fixed-Rate Business Tariff?
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