Business Energy Deemed Contract: Avoid Default Rates

Moving into new business premises is one of the most distracting periods any SME owner faces. Between lease negotiations, fit-out logistics, and staff briefings, energy contracts rarely feel urgent — until the first bill arrives and the numbers make no sense. That bill is almost certainly the result of a business energy deemed contract, a default arrangement that suppliers are legally permitted to charge at some of the highest rates available. Understanding how deemed contracts work, why they kick in, and how to exit them quickly can save a significant amount of money in the months following a move.

What Is a Business Energy Deemed Contract?

A deemed contract is a legal supply arrangement that begins automatically when a business takes occupation of premises that already have a live energy connection, without first agreeing a formal contract with the existing supplier. The supplier has a legal obligation to keep the lights on, and in return, they charge deemed rates — rates they set themselves, subject to regulatory guidelines but not competitively tendered.

Deemed contracts are distinct from out-of-contract rates, which apply when an existing business contract expires and rolls over without renewal. Both are expensive by design, but deemed contracts specifically apply to new occupiers who have not yet made any contact with the supplier.

Why deemed rates are so high

Suppliers price deemed contracts to reflect commercial risk. They do not know who you are, what your usage profile looks like, or whether you intend to stay. The rates compensate for that uncertainty, and because there is no competitive pressure at the point of supply, there is little incentive to keep them low.

For SMEs on tight margins, this matters. A small warehouse or retail unit running on deemed rates for three to six months can accumulate a bill that is meaningfully larger than it would have been on a negotiated fixed or variable tariff. The gap is real, and it compounds the longer you leave it.

How Deemed Contracts Begin When You Move Premises

The trigger is occupancy, not notification. The moment you take possession of a premises with an active meter, you are legally treated as the energy customer, even if you have not signed anything, spoken to any supplier, or even checked who the current supplier is.

The typical sequence of events

When a business moves into new premises, the following usually unfolds:

• The outgoing tenant's contract ends or they request a final read.
• If no new contract is in place, the supplier activates deemed terms automatically.
• Your first invoice arrives weeks later at deemed rates, sometimes covering a period you were not even fully trading from the site.
• If you were unaware, you may have already accumulated a month or more of default charges.

The problem is compounded when landlords do not communicate which supplier is active, or when meters are unregistered, meaning supply defaults to a supplier of last resort on emergency rates that can be even higher.

The Key Differences Between Deemed, Out-of-Contract, and Fixed Tariffs

Understanding the terminology helps you ask the right questions and act at the right time.

The headline point is that both deemed and out-of-contract arrangements offer no exit penalties. You can leave at any time. The sooner you do, the less you pay at default rates.

What to Do in the First 72 Hours of Taking New Premises

Speed matters more than most business owners realise. The actions you take in the first few days of occupancy directly determine how much you pay and how clean your account history looks when you approach alternative suppliers.

Step one: Identify the existing supplier

Start by checking any paperwork left by the outgoing tenant or landlord. If that is not available, you can use the national meter database. For electricity, the Meter Point Administration Service (MPAS) can identify the registered supplier for any meter point reference number (MPRN). For gas, the equivalent is Xoserve, which manages the national gas registration system.

Your landlord is required to give you reasonable assistance in identifying the existing supply arrangements. If they cannot or will not help, contact the Distribution Network Operator for electricity in your region directly.

Step two: Take meter readings and photograph them

Take dated photographs of all meter readings the moment you take possession. This creates an evidential baseline that protects you from being billed for the outgoing tenant's consumption. It also gives you an accurate starting point for any switching process.

Step three: Notify the supplier in writing

Contact the existing supplier as soon as you have identified them. Tell them you have taken occupation, provide your meter readings and the date of possession, and make clear that you have not agreed to their deemed terms as a long-term arrangement. This notification begins the audit trail that supports any billing disputes later.

Step four: Start comparing tariffs immediately

Do not wait for the first bill before acting. Use the time between notification and your first invoice to compare available tariffs. The deemed contract cannot prevent you from switching, and there are no exit fees to worry about. Moving to a fixed tariff quickly is the most direct way to reduce what you pay.

Compare business energy tariffs with Aarubi to see what is available for your premises before your first deemed bill compounds.

Looking to reduce your business operating expenses? Aarubi can review your energy, card processing, insurance and business funding options. Request a free consultation

Common Mistakes SMEs Make During a Premises Move

Even experienced business owners make avoidable errors in the energy transition. The following mistakes are among the most costly.

Assuming the landlord has sorted it. Landlords are responsible for the fabric of the building, not your energy contracts. Unless your lease explicitly states otherwise, energy supply is your responsibility from day one of occupation.

Waiting for a bill before acting. By the time your first deemed bill arrives, you may already owe two to three months of default charges. Starting the switching process before that bill lands is always the better approach.

Ignoring half-hourly meters. Larger premises with half-hourly (HH) meters have different supplier registration processes and may require a more formal handover. If your premises has an HH meter, seek specialist advice early.

Failing to register a vacant property. If you take a lease but are not immediately trading, you still become liable for the energy supply. Vacancy does not pause deemed contract charges in most cases.

Overlooking dual fuel opportunities. Many SMEs arrange electricity and gas contracts separately and miss the administrative simplicity and sometimes the pricing benefit of combining them with a single supplier. When comparing, check both fuels at the same time.

How to Exit a Deemed Contract and Agree a Better Tariff

Exiting a deemed contract is simpler than many business owners expect, because there are no exit fees and no minimum notice period under deemed terms. The process broadly follows these steps.

First, gather your consumption data. Suppliers will ask for your estimated annual usage (in kWh) to provide accurate tariff quotes. If you are new to the premises, the outgoing tenant's final bill or Estimated Annual Consumption (EAC) figures from the meter database are a reasonable starting point.

Second, compare available tariffs using a business energy comparison service. Fixed-term contracts of twelve, twenty-four, or thirty-six months typically offer the most predictable costs. Variable tariffs offer flexibility but expose you to wholesale price movements. Neither is universally better — your decision should reflect your cash flow needs, your appetite for price risk, and how long you expect to remain at the premises.

Third, once you have chosen a tariff, your new supplier manages the registration process. They will notify the existing supplier and arrange the transfer. Under current Ofgem rules, the transfer process for non-half-hourly meters should complete within seventeen working days, though in practice it can be faster.

Finally, confirm your meter readings with both the outgoing supplier and the new one to prevent any gap in billing records.

You can review your options for business electricity and gas directly through Aarubi, which works with a range of commercial energy providers across the UK market.

Documents and Information You Will Need

Having the right information ready speeds up the comparison and switching process considerably. Prepare the following before approaching any supplier or broker.

• Your business name, registered address, and Companies House number if applicable.
• The full address of the new premises and the postcode.
• Meter Point Reference Number (MPRN) for electricity and Meter Point Reference Number (MPRN) or gas Meter Point Reference Number (GPRN) as appropriate.
• Current meter readings with dated photographic evidence.
• Estimated annual consumption figures, or the outgoing tenant's bills if available.
• Your preferred contract start date.
• Bank details for direct debit setup.

If you are a sole trader or partnership rather than a limited company, you may also be asked for personal identification as part of the supplier's credit assessment. Commercial energy contracts are not regulated under consumer credit law, so approval processes vary by supplier.

Action Checklist

• Before you move: Confirm with your landlord who the current energy supplier is and request any available consumption data for the premises.
• On day one of occupancy: Take dated photographs of all meter readings for both electricity and gas.
• Within 24 hours: Identify the existing supplier using MPAS (electricity) or Xoserve (gas) if the landlord cannot confirm it.
• Within 48 hours: Notify the existing supplier in writing that you have taken occupation and provide your opening meter readings.
• Within the first week: Gather your estimated annual consumption data and begin comparing tariffs.
• Before signing: Check whether any proposed tariff includes standing charges, pass-through costs, or out-of-hours rates that could affect your total bill.
• At switch: Confirm meter readings with both the outgoing and incoming supplier to create a clean billing break.
• After switch: Set a calendar reminder for 90 days before your contract end date to begin renewal comparisons and avoid rolling onto out-of-contract rates.
• Ongoing: Review your energy costs annually alongside your other operating expenses — card processing, insurance, and business funding included.