Introduction: The Hidden Cost of Business Energy
Many UK businesses unknowingly pay more than necessary for their gas and electricity because they’ve fallen onto a deemed tariff – one of the energy market’s most expensive default rates. At ScaleX Technology, we help businesses avoid these costly traps, and in this guide, we’ll explain everything you need to know about deemed tariffs and how to escape them.
What is a Deemed Tariff?
A deemed tariff (sometimes called a “deemed rate”) is the default energy contract you automatically get placed on when:
- Moving into new business premises
- Your existing energy contract expires without renewal
- Your energy supplier goes out of business
- You haven’t actively chosen an energy tariff
Key Characteristics of Deemed Tariffs
✔ No fixed term – You can leave at any time
✔ Higher rates – Typically 20-40% more expensive
✔ No discounts – Pay full standard rates
✔ Variable pricing – Rates can change with market conditions
How Businesses End Up on Deemed Tariffs
| Common Scenario | Why It Happens |
|---|---|
| Moving into new premises | Previous tenant’s contract ended |
| Contract expiration | Auto-rollover without renewal |
| Supplier collapse | Ofgem moves customers to new provider |
| Failed switch | Issues during transfer process |
The True Cost of Deemed Tariffs
Case Study Example:
A London café on a deemed tariff was paying:
- Electricity: 45p/kWh (vs. 30p/kWh on competitive tariff)
- Gas: 12p/kWh (vs. 8p/kWh on competitive tariff)
- Result: £3,600 annual overpayment
How to Check if You’re on a Deemed Tariff
- Review your latest bill – Look for “deemed” or “out of contract” wording
- Check your contract end date – Suppliers must notify you before expiration
- Compare current rates – Use Ofgem-approved comparison sites
- Contact your supplier – Ask directly about your tariff status
How to Get Off a Deemed Tariff
Immediate Actions
- Switch suppliers – Even within same provider to better rate
- Negotiate new contract – Suppliers often have discretion
- Request backdated refunds – If wrongly placed on deemed rates
Preventative Measures
✔ Diarise contract end dates – Set reminders 3-6 months before expiration
✔ Understand termination clauses – Notice periods vary
✔ Keep switching paperwork – Confirm new contract start dates
Special Considerations
Business vs. Domestic Deemed Tariffs
- Business deemed rates are typically higher than domestic
- Fewer protections for microbusinesses
- Complex exit fees may apply in some cases
Temporary Deemed Periods
- 14-28 days common during supplier switches
- Shouldn’t last longer than necessary
- Can query prolonged deemed periods
When Deemed Tariffs Might Actually Benefit You
In rare cases, deemed rates may be preferable:
- Very short-term occupancy (less than 3 months)
- Uncertain energy needs during business changes
- Pending renewable installation delaying new contract
Expert Tips to Avoid Deemed Tariffs
- Never let contracts auto-roll – Always proactively renew
- Use a broker – Professional energy consultants monitor contracts
- Go digital – Smart meters help track tariff changes
- Audit annually – Review all utility contracts systematically
Take Control of Your Business Energy
Deemed tariffs represent one of the most common – yet avoidable – energy cost pitfalls for UK businesses. By understanding how they work and implementing proactive contract management, you can ensure your business always benefits from competitive market rates rather than defaulting to expensive alternatives.
At ScaleX Technology, we specialise in helping businesses navigate complex energy contracts and avoid costly deemed tariffs. Our team can review your current arrangements and ensure you’re never paying more than necessary for your utilities.
Contact us today for a free, no-obligation energy contract health check.
