Deemed energy contracts: what you need to know

Deemed energy contracts are default agreements that can lead to higher energy bills if you do not actively choose a supplier or tariff. They often apply when you move into a new home and start using gas and electricity without signing a new contract. Understanding these contracts and your options is crucial for securing fairer bills.

If you are on a deemed energy contract, you could be paying more than necessary for your energy. Take control of your bills by understanding your options and switching to a tariff that suits your home. Fuse Energy offers transparent tariffs and a straightforward switching process.

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What are deemed energy contracts?

A deemed energy contract is a default arrangement that automatically applies when a new occupant starts consuming energy at a property without actively choosing a supplier or tariff. This often happens when you move into a new home and simply begin using electricity and gas without signing a new contract with an energy provider.

The basics of a deemed contract

These contracts are not actively chosen; they are imposed by the existing supplier at the property. They ensure continuous energy supply, but they typically place you on a supplier's Standard Variable Tariff (SVT). SVTs are subject to the Ofgem Price Cap, which sets a maximum unit rate and standing charge. While the price cap protects consumers from excessive charges, these rates are generally higher than those available on fixed-term tariffs. You can learn more about how the price cap works in our guide to the energy price cap explained.

How you might end up on a deemed contract

The most common way to find yourself on a deemed contract is by moving into a new property. When you take over the energy supply without explicitly agreeing to a new contract with a supplier, you automatically become a deemed customer of the existing supplier. This can also occur if your previous fixed-term contract expires and you do not switch to a new one, though this is more accurately an out-of-contract rate rather than a deemed contract in the strictest sense.

Identifying and understanding deemed rates

Knowing if you are on a deemed contract and what it means for your wallet is crucial. The key is to check your energy bill and understand the rates you are paying.

Checking your energy bill and supplier information

Your energy bill is the primary place to check your contract status. Look for terms like "SVT," "deemed contract," or "out of contract rates." If your bill does not explicitly state your contract type, or if you have not actively chosen a tariff, it is highly likely you are on a deemed contract. You can also contact the energy supplier listed on your bill directly to confirm your contract status and current rates. Understanding your bill is key to managing your energy costs understanding your energy bill.

The financial impact of deemed rates

Deemed contracts, by placing customers on SVTs, often lead to higher energy costs. While the Ofgem Price Cap limits how much suppliers can charge per unit of energy and for daily standing charges, these capped rates are typically more expensive than the competitive fixed-term deals available on the market. For an average UK home, which uses around 2,500 kWh of electricity and 9,500 kWh of gas per year1, these higher rates can add up significantly over time. Delaying action means paying these elevated default rates for longer than necessary.

Your rights and options with deemed contracts

Consumers on deemed contracts have clear rights and protections, primarily governed by the energy regulator, Ofgem. You are not tied into these agreements and have the freedom to seek a better deal.

Ofgem regulations and consumer protections

Ofgem, the UK's energy regulator, oversees deemed contracts and the rates associated with them. The Ofgem Price Cap directly influences the maximum charges suppliers can apply to SVTs, under which deemed contracts typically fall. Energy suppliers are required to provide clear information to consumers about their contract type and their ability to switch. This regulatory framework is designed to protect consumers and ensure transparency in the energy market.

Switching suppliers without penalty

One of the most important rights for customers on deemed contracts is the ability to switch suppliers at any time without incurring exit fees. Unlike some fixed-term contracts that might charge a penalty for early departure, deemed contracts offer complete flexibility. This means you can move to a more competitive tariff or a different supplier as soon as you find a better deal, without financial repercussions. This is a key benefit when switching energy supplier.

How to switch from a deemed energy contract

Switching away from a deemed contract is a straightforward process that can lead to significant savings. It involves gathering information, comparing options, and initiating the switch.

Gathering your current energy information

Before you can switch, you will need some key details from your current energy supply. This includes your current supplier's name, your Meter Point Administration Number (MPAN) for electricity and Meter Point Reference Number (MPRN) for gas (both found on your bill), and your current energy usage. Knowing your annual consumption (in kWh) will help you accurately compare tariffs.

Comparing tariffs and suppliers

With your information in hand, it is time to research and compare available energy tariffs from various suppliers. Use independent price comparison websites to get a comprehensive overview of the market. Look beyond just the unit rates; consider standing charges, contract length, and any potential exit fees (though these will not apply if you are switching from a deemed contract). Focus on finding a tariff that aligns with your energy usage patterns and offers better value than your current deemed rates. It is important to understand the differences between fixed vs variable energy tariffs to make an informed choice.

Making the switch: a step-by-step process

1. Identify your current contract: Confirm you are on a deemed contract by checking your bill or contacting your supplier.
2. Understand your usage and rates: Note down your current unit rates, standing charges, and annual consumption for both gas and electricity.
3. Research and compare: Use comparison tools to find a more suitable and competitive energy deal.
4. Initiate the switch: Once you have chosen a new supplier and tariff, they will handle most of the switching process for you.
5. Provide final meter readings: Your new supplier will ask for final meter readings on the day your supply switches over to ensure accurate final billing from your old supplier.

Taking control of your energy choices

Actively managing your energy choices means moving beyond default rates and finding a tariff that truly works for you. This proactive approach offers both financial and personal benefits.

The benefits of proactive energy management

By switching from a deemed contract, you gain control over your energy costs. You can choose tariffs that offer lower rates, better terms, or features that suit your lifestyle, such as tariffs designed for electric vehicle owners or those with smart meters. This proactive management empowers you to avoid paying inflated default rates and ensures you are getting a fairer deal for your energy. It aligns with the principle of not settling for the status quo of default, often higher, energy costs.

Beyond deemed: finding a tariff that works for you

The energy market offers a variety of tariffs, from fixed-rate deals that lock in your prices for a set period to variable tariffs that fluctuate with wholesale costs. Finding a tariff that works for you involves considering your tolerance for risk, your energy consumption habits, and any specific needs you might have. Switching to a supplier that offers transparent tariffs and supportive customer service can enhance your confidence and control over your energy decisions.

Do not let a deemed energy contract dictate your bills. Take the first step towards a better deal by exploring your options. Fuse Energy makes switching simple, with transparent pricing and dedicated support to help you find a tariff that truly fits your home. Click here to switch to Fuse Energy today.