What Are Deemed Rates for Business Gas? Everything You Need to Know
If your business moves into new premises and starts using gas before agreeing a formal energy contract, the existing supplier can place the supply onto a deemed contract. In practice, these are the supplier's default rates for supplying gas where no negotiated contract is in place. They can be more expensive than contracted business gas rates, so it is worth reviewing the arrangement promptly.
Business Utility Hub can help you compare business gas and electricity contracts if you are currently paying deemed rates or are unsure about your contract position.
Find out what deemed rates are, how they can affect your business’s energy bills, and the steps you can take to move onto a more suitable energy contract.
What are business gas deemed rates?
Business gas deemed rates are the unit rates and standing charges applied under a deemed contract. A deemed contract can exist even though the business has not signed or verbally agreed a formal contract with the supplier.
Ofgem explains that a business can be placed on a deemed contract when it moves into new premises and uses gas before agreeing a contract. A deemed contract may also apply when an old contract expires and does not set out what happens afterwards. You can read Ofgem's business energy contract guidance for the current definitions.
The supplier continues the gas supply and charges its published deemed contract rates until a new contract is agreed.
What happens when a business moves into new premises?
If the previous occupier had a gas supply, the existing supplier will normally continue supplying the premises. Citizens Advice explains that a business which has not arranged a contract before moving in will probably be placed onto a deemed contract, which may cost more than other available tariffs.
Their guidance on moving business premises recommends arranging a better deal with the existing supplier or comparing a new supplier once the business takes responsibility for the property.
Are deemed rates the same as out-of-contract rates?
No. Deemed rates and out-of-contract rates are different arrangements, but both can leave a business paying more for its energy than it would under a negotiated contract.
Deemed rates
Usually apply when a business is using gas or electricity without having agreed a formal contract with the supplier. This often happens after moving into new premises, or when an existing contract ends without setting out what should happen next. Deemed contracts can be more expensive because the supplier is providing energy without a newly negotiated agreement in place.
Out-of-contract rates
Apply when a business energy contract has ended and the original agreement already sets out the rates or terms that will apply afterwards. These rates can also be higher than the prices available through a newly negotiated business energy contract.
In both cases, the business risks paying additional energy costs simply because a new contract has not been agreed. The longer the business remains on deemed or out-of-contract rates, the more those higher charges can add to operating costs.
That is why it is worth identifying which arrangement applies, checking when you are free to move and comparing new business energy rates as soon as possible.
Why are out-of-contract gas rates so high?
Out-of-contract and deemed rates can be higher because the supplier is continuing to provide energy without the certainty of a fixed-term agreement.
Ofgem notes that deemed arrangements can cost more because suppliers may need to buy additional wholesale energy at short notice and take on more commercial risk. Suppliers may also factor administration and uncertainty around how long the customer will remain into their published rates.
Unit rates and standing charges vary between energy suppliers, so compare the current deemed or out-of-contract rate with the formal contracts available to your business.
How do business gas deemed rates affect my monthly energy bills?
A monthly gas bill on deemed rates is still driven mainly by how much gas the business uses, but the rate applied to that usage can be higher than under a negotiated energy contract.
The main bill components can include:
- the gas unit rate, charged for each kilowatt hour used;
- the daily standing charge;
- applicable taxes and levies; and
- any other supplier charges permitted under the deemed contract terms.
For businesses with high energy usage, a difference in the unit rate can have a noticeable impact on total energy costs.
What makes up a deemed gas rate?
Each business energy supplier sets and publishes its own deemed contract rates. The price can reflect wholesale gas costs, supplier operating costs, commercial risk and the charges associated with maintaining the supply.
Your bill may also include the Climate Change Levy where it applies. From 1 April 2026, the main Climate Change Levy rate for natural gas is £0.00801 per kWh, according to GOV.UK's current Climate Change Levy rates.
Because deemed rates are not fixed in the same way as a fixed-price contract, the amount charged can change. Checking both the unit rate and standing charge gives you a clearer picture of what the current arrangement is costing.
Are deemed contracts legally enforceable?
Yes. A deemed contract can be legally binding even though the customer did not sign a conventional supply agreement.
Ofgem's guidance on deemed contracts covers the licence conditions that apply to gas and electricity suppliers in Great Britain, while separate Ofgem guidance explains how a deemed contractual relationship can arise under the Gas Act 1986 and Electricity Act 1989.
This provides a contractual basis for energy supplied when no negotiated agreement exists.
How do you move from deemed rates to a business gas contract?
Moving away from deemed rates starts with confirming the supply and comparing formal contract options.
Useful information includes:
- Your current gas supplier.
- Your business address.
- A recent bill or meter reading.
- Your annual gas consumption, if available.
- Your Meter Point Reference Number (MPRN), which identifies the gas supply point.
You can then compare a new contract with the existing supplier or look at offers from other energy suppliers. Business Utility Hub's business gas comparison service can compare contract rates and explain the available options.
What should I check before accepting a business gas deemed rate quote?
If your current supplier offers a new tariff while you are on deemed rates, compare the whole deal rather than focusing on a single headline price.
Check:
- The unit rate;
- The standing charge;
- Whether the rate is fixed or variable;
- The estimated annual cost based on your usage;
- The contract length;
- Any termination notice requirements;
- Exit fees or other termination conditions; and
- What will happen when the new contract expires.
Compare the offer with other available contract rates before signing. Staying with the same supplier is an option, but not the only one.
Can you stay with the same supplier?
Yes. Moving off a deemed tariff does not automatically mean switching supplier.
Your existing supplier may be able to offer a formal contract with a fixed price or another tariff structure. The key is to compare that offer with the wider options available and decide which arrangement suits your business.
For smaller organisations, Business Utility Hub also provides SME energy deal comparison, while higher-consuming businesses can use our large business energy quote service.
How Business Utility Hub can help you move off deemed rates
Deemed rates keep electricity and gas supplies running when there is no negotiated energy contract in place, but they can leave businesses paying higher or less predictable rates.
Business Utility Hub can review your current supply position, explain whether you appear to be on a deemed or out-of-contract tariff and compare suitable contracts across our selected panel of UK business energy suppliers.
We monitor business energy prices daily and compare unit rates, standing charges and contract terms clearly. If you choose a new supplier, we can manage the switch from start to finish, with a dedicated account manager who understands your premises and contract position.
There is no obligation to switch. Our remuneration comes from the supplier you choose, and our commission structure can be disclosed on request.
If you are currently paying deemed rates, arranging a formal business energy contract can give you clearer terms and greater price certainty.
Review your energy contract before you sign elsewhere
Review your business electricity contract before renewal, after expiry or if your manufacturing facility is getting the best rate
