Deemed energy contracts explained

Moving home often means you automatically land on a deemed energy contract, which can be significantly more expensive than choosing your own tariff. Understanding these default agreements and how to switch away from them is a crucial step in taking control of your energy costs.

Deemed energy contracts can seem confusing, but switching to a new tariff doesn't have to be. Fuse Energy makes it simple to understand your options and manage your energy. Click here to see how easy it is to get started.

What is a deemed energy contract?

A deemed energy contract is a default agreement for gas or electricity that automatically applies when you move into a new property and start using energy without actively choosing a supplier or tariff. This ensures a continuous supply of energy to your new home from the moment you move in, but it means you haven't formally agreed to terms with the energy supplier. Ofgem, the UK's energy regulator, oversees these contracts to ensure their terms are not "unduly onerous" and that consumer rights are protected.

How deemed contracts arise

Deemed contracts arise out of necessity. When you move into a property, the energy supply cannot simply stop. The existing supplier for that property continues to provide energy, and a contractual relationship is deemed to exist between you and that supplier. This happens whether you're a homeowner or a tenant, and it's designed to prevent interruptions to essential services.

The legal basis of deemed contracts

The legal basis for deemed contracts stems from the need to ensure continuous energy supply. Even without an explicit agreement, the act of consuming energy at a property creates a legal obligation to pay for it. Ofgem's regulations ensure that while these contracts are legally binding, consumers are also protected, particularly regarding their right to switch suppliers without penalty.

Why deemed contracts are often more expensive

Deemed contracts are rarely the most competitive option available. They are designed for continuity, not for offering market-leading rates. This means you’re likely paying more than necessary for your gas and electricity.

Default rates and standard variable tariffs

The rates on a deemed contract are typically set at the supplier's default or Standard Variable Tariff (SVT). While a deemed contract is the type of agreement, the SVT is the pricing structure often applied to it. SVTs can fluctuate with market conditions and are generally not as competitive as fixed-rate tariffs or other deals available to new customers. This can lead to higher unit rates and standing charges compared to tariffs you actively choose.

No exit fees: your right to switch

One significant advantage of being on a deemed contract is that you are not tied into a long-term agreement and there are no exit fees. This means you can switch to a new energy supplier or tariff at any time without incurring penalties. This flexibility is a key consumer protection, allowing you to move to a more competitive deal as soon as you find one.

Your rights and how to switch

You have clear rights when on a deemed contract, and switching away from one is a straightforward process designed to empower you to find a better deal.

Checking your current contract status

If you've recently moved, you are likely on a deemed contract. Your energy supplier is legally obliged to inform you about your contract and your right to switch. You can confirm your status by checking your first bill or contacting the energy supplier currently providing power to your property. They can provide details on your current unit rates and standing charges.

Step-by-step guide to switching supplier

Switching from a deemed contract is simpler than you might think and typically takes 5 working days. Here’s how to do it:

1. Identify your current supplier and tariff: Check your first bill or contact the property's existing supplier to understand your current rates.
2. Gather your usage data: Knowing your annual electricity and gas consumption (if applicable) will help you get accurate quotes. If you don't have a full year's data, your supplier can provide an estimate. The average UK home uses around 2,700 kWh of electricity per year.
3. Compare tariffs: Use an independent comparison service to explore available tariffs from different suppliers. Look for deals that offer better unit rates and standing charges than your current deemed contract.
4. Choose a new supplier and tariff: Select the deal that best suits your needs and initiate the switch. Your new supplier will handle most of the process.
5. Provide meter readings: You'll be asked to provide accurate meter readings to both your old and new suppliers on the day of the switch. This ensures a smooth transition and correct final billing.

Taking control of your energy

Switching from a deemed contract is more than just changing suppliers; it's a proactive step to manage your household budget and ensure you're not overpaying for an essential service.

The benefits of switching

By actively choosing a new tariff, you can secure more competitive rates, potentially saving a significant amount on your annual energy bills. Beyond financial savings, switching gives you peace of mind, knowing you're on a tariff that suits your usage patterns and preferences. It also encourages competition in the energy market, leading to better deals for everyone.

Fuse Energy: making your power play

Switching from a deemed energy contract is a definitive "power play" – a move that shifts control and advantage directly into your hands. Fuse Energy empowers you to make this move by offering a simple, transparent process for understanding your energy options and switching away from often costly default contracts. We encourage you not to settle for default options, aligning with our belief to never settle for anything less than better energy management.

Fuse Energy offers 24/7 human customer support to provide reassurance and guidance, helping you navigate the switching process. This commitment to simplicity and transparency, backed by continuous support, makes taking control of your energy supply straightforward.