Deemed Contracts: The Rate You Pay Before You Choose a Tariff

The rate is the point of friction. Deemed rate customers are likely to have to pay more than customers on contracts, and Ofgem has seen examples where deemed rate customers are charged more than double the rate of customers on contracts¹. The arrangement is not indefinite: Ofgem guidance describes a deemed contract as a six-month arrangement, after which it must go back to its normal rate². There is no fixed term and no exit fee, so leaving is a matter of agreeing a tariff rather than serving notice.

For a household's energy independence, the deemed contract is the opposite of self-determination: the supplier is chosen by circumstance, the price by the supplier's default, and the only lever is to sign a contract or switch. The protection that remains is the price cap, which applies even here².

What a deemed contract is and when one arises

A deemed contract is normally in place when a customer moves to new premises and starts to consume gas or electricity, or both, without agreeing a contract with a supplier¹. The trigger is consumption, not paperwork. Ofgem has confirmed a deemed contract existed in a case where gas was available to a microbusiness even though none was consumed, which shows how little is needed for the arrangement to attach¹.

The same principle applies beyond mains gas and electricity. On a heat network, a deemed contract applies when there is no supply contract or accepted alternative supply contract in place, for example where a consumer has moved into a heat network property and consumes heating, hot water or cooling with no supply contract in place³. Communal heating residents therefore meet the same default terms as a household that has just picked up the keys to a gas-supplied flat.

A deemed contract is not the only way a household can end up on terms it did not choose. Some living situations sit on business energy contracts instead, including a park home or holiday park occupied as a permanent resident, a houseboat, a traveller site, farm accommodation, a caravan or mobile home, housing provided by an employer as tied accommodation, and housing connected to a business premises such as a flat above a shop or pub⁴. Those residents face a different regime, and the protections described here do not map onto it cleanly.

How the rate is set: the supplier's default tariff

The deemed rate is not a bespoke price. Citizens Advice states that a household moving in is automatically put onto a deemed contract with the supplier, and that this will be for their default or standard variable tariff⁵. The Energy Saving Trust defines the standard variable rate tariff as usually the supplier's default tariff, likely at the end of any fixed rate tariff, and separately defines the standard variable rate as the default tariff for a supplier where the price per unit of energy can change over time⁶.

That default is a variable product, not a fixed one. Ofgem describes the standard variable tariff as one where the price paid can go up or down based on things like the cost of buying energy on the open market⁸. Which is why the deemed rate moves: it tracks the supplier's own default pricing rather than a rate agreed for a term.

The tariff menu a supplier offers is wider than the default. Tariffs offered by energy suppliers may include a standard variable tariff, a renewable energy tariff, an electric vehicle tariff, a fixed price, and prepayment energy tariffs (pay as you go)⁹. A household on a deemed contract is sitting on the first of those by default, and can move to any of the others by agreeing a contract.

The gap between the deemed rate and a contracted rate is the practical cost of doing nothing. Ofgem's own guidance records that customers on deemed rates are likely to have to pay more than customers on contracts, and that examples have been seen where deemed rate customers are charged more than double the rate of customers on contracts¹. That is the figure to hold onto: not a percentage, but a multiple, drawn from the regulator's casework.

No fixed term, no exit fee, no notice to leave

The terms of a deemed contract are deliberately loose. Ofgem guidance states that the deemed contract does not provide for any fixed term period or any termination fee to be payable by the Consumer, and that no form of notice is required before entering into a Supply Contract in place of the deemed contract³. The same wording appears in the draft guidance: no fixed term period and no termination fee payable by the Consumer, continuing until an authorised person begins supply under a Supply Contract, with no form of notice required before entering a Supply Contract³.

This is where the deemed contract differs sharply from a fixed-term tariff. An exit fee is the amount charged by an energy supplier if a customer wants to leave a contract early¹⁰. On a fixed-term tariff, a household in the last 49 days of the contract does not have to pay an exit fee and has the right to switch freely without being charged¹¹. On a deemed contract there is no fee at any point, because there is no term to break.

Business customers face the opposite position. Business energy customers cannot get out of their contract early, though they can secure a new deal up to 12 months before the current one ends¹⁰. A household that has drifted onto business terms through the living situations listed above therefore has less freedom than one on a domestic deemed contract.

The six-month rule and what follows

Ofgem guidance describes the arrangement in plain terms: a household will be put on an energy contract for 6 months called a deemed contract, and after 6 months the deemed contract must go back to its normal rate². The six-month period is the marker for the arrangement, not a lock-in. It does not prevent a household agreeing a contract on day one, and it does not extend the arrangement if nothing is done.

For comparison, most energy deals run for between 12 and 24 months¹². A deemed contract is therefore shorter than a typical fixed deal, but it is not a deal at all: it is the absence of one, with the supplier's default pricing filling the gap.

Heat networks have their own transition timetable, which shows how much slower structural change is than a household switch. Ofgem's decision document suggests compliance for new contracts by regulatory commencement, within 6 to 12 months for legacy variations, and up to 24 months for complex leasehold arrangements³. Those are the regulator's suggested phasing for heat suppliers, not a household timescale, and they illustrate that the deemed arrangement on a heat network can persist far longer than six months in practice.

The practical reading of the six-month rule is that it sets an expectation rather than a deadline. A household that agrees a contract at any point moves off the deemed rate immediately. A household that does nothing remains on the supplier's default terms, and the guidance's requirement that the contract revert to its normal rate after six months is the regulator's way of marking the boundary of the deemed period.

Price cap protection and what a deemed contract can cost

The price cap is the main protection on a deemed contract. Ofgem states that a customer is still covered by the energy price cap even if put on a deemed contract². The cap is a limit on how much energy companies can charge for each unit of gas and electricity on their standard variable tariffs¹³, and it protects people who are on tariffs where the unit rate can go up or down depending on the energy market⁸.

Eligibility turns on the absence of a fixed-term agreement. The cap applies where a customer has not signed up for a fixed-term contract with their supplier⁹. That is precisely the deemed contract position, which is why the protection reaches it. Independent guidance confirms that a household on the supplier's standard variable tariff is protected under Ofgem's energy price cap, which caps the price paid for each unit of energy¹¹, and that suppliers do have limitations on how much they can charge for energy¹⁴.

The cap does not cover everything. Fixed tariffs, business energy contracts, heat networks and heating oil sit outside it⁸. A household on a heat network deemed contract therefore does not have the same unit-rate protection as one on a domestic gas and electricity deemed contract, and a household on business terms because of its living situation falls outside as well.

The cap is also a moving figure rather than a fixed ceiling. Variable tariffs are determined by the energy price cap and change every three months¹⁵. In a parliamentary debate on heating oil support, the government stated that a household's bill would go down in April and that this was protected to the end of June¹⁶. The cap's level is set periodically, so the protection is real but the number behind it is not permanent.

Moving in: the previous occupant's supplier and your next steps

When a household moves in, whoever supplied energy to the previous owners automatically becomes the supplier¹⁷. The supplier will probably send a letter addressed to The Occupier soon after the move¹⁸. That letter is the first sign of the deemed contract, and it usually arrives before any choice has been made.

Switching can begin as soon as responsibility for the property passes, which for a purchase is after exchange of contracts¹⁹. The new supplier chosen manages the switch²⁰. A smart meter does not obstruct this: switching supplier with a smart meter is a routine process²⁰. For households that want to know who currently supplies the property before deciding, the supplier's own records and the occupier letter are the starting points.

Where the property is supplied through a business contract, the checks differ. Before moving to a home supplied through a business contract, it is worth checking who holds the energy contract, how energy charges are calculated, how much residents typically pay, whether charges are metered or estimated, whether the supplier or tariff can be chosen, and whether it is possible to switch to a domestic contract⁴. A resident who has their own contract with an energy supplier may be able to switch their business energy supplier²¹.

Northern Ireland runs a separate market, and the NI Energy Advice Service is funded by the Department for Communities and delivered by the Housing Executive²². Households there should treat the supplier landscape as distinct from Great Britain's.

Getting a copy of the contract, and what to do if it goes wrong

A copy of the deemed contract is available on request and should not cost anything. Ofgem guidance requires that a copy of a Deemed Contract must be provided free of charge within a reasonable period of time after receiving the request³. This is a separate document from the Energy Performance Certificate, which must be provided to the purchaser free of charge as a legal requirement²³, and which in Scotland should be made available to buyers or prospective tenants at no cost, with buyers receiving a copy from the seller that can be reused within the period of validity²⁴.

If the terms look wrong, the complaint route is the standard one. A household can complain if a reported problem is not fixed within 8 weeks, if the household and the energy company cannot agree how to fix it, if a deadlock letter is received, or if the decision received is not satisfactory. The Energy Ombudsman will inform the complainant of its decision within 6 weeks of escalation, and the service is free and independent. The Ombudsman is approved by Ofgem, the UK energy regulator, to handle service disputes in the energy sector.

The legal test behind the terms is worth knowing. Ofgem rules state that the terms of deemed rate contracts should not be unduly onerous¹. The regulator's test is that suppliers can ensure contracts are not unduly onerous by making sure the profit derived from deemed rate customers is not significantly higher than the profit derived from contracted customers¹. That is the standard against which a deemed rate can be challenged, and it is a test about the supplier's margin, not about the household's bill.