Deemed energy contract explained

When you move into a new home, you might find yourself on a deemed energy contract without explicitly agreeing to it. These contracts are a default arrangement that energy suppliers use when there isn't an active agreement in place for your property's energy supply. They often come with higher rates than actively chosen tariffs, meaning you could be paying more for your gas and electricity than necessary.

Moving into a new home and finding yourself on a deemed energy contract can be confusing, but switching to a better deal is straightforward. Fuse Energy offers clear pricing and a simple sign-up process, so you can quickly take control of your energy bills. Click here to switch to Fuse Energy today.

What is a deemed energy contract?

A deemed energy contract is a default energy supply agreement that automatically applies to a property when a new occupant starts using gas or electricity without having signed a formal contract with a supplier. This often happens when you move into a new house and simply start consuming energy, inheriting the previous occupant's supplier. These contracts ensure a continuous supply of energy, but they are rarely the most cost-effective option.

When does a deemed contract apply?

Deemed contracts typically come into effect in several common scenarios. The most frequent is when you move into a new home and begin using energy without first contacting a supplier to set up a new account or switch to a preferred tariff. This means you are automatically supplied by the existing provider for that property. Similarly, if a fixed-term contract ends and you do not renew or switch, you might be rolled onto a deemed contract, though suppliers usually move you to a Standard Variable Tariff in such cases.

The difference between deemed and fixed contracts

The primary difference between deemed and fixed contracts lies in how their prices are set and their terms of service. A fixed contract locks in your unit rates and standing charges for a set period, usually between 12 and 18 months, offering price stability. For a deeper dive into different energy pricing structures, you can read our guide on understanding energy tariffs. Deemed contracts, on the other hand, usually operate on variable rates, which means the price you pay for energy can change, often with little notice. Crucially, deemed contracts generally do not have exit fees, giving you the freedom to switch at any time. Fixed contracts, however, often include exit fees if you leave before the contract term ends.

Why deemed contracts can cost you more

Deemed contracts are designed to be a temporary solution, not a long-term energy plan. Because of this, the rates associated with them are often less competitive than those found on the open market, leading to higher costs for consumers.

Understanding deemed rates and standing charges

Deemed contracts typically have higher unit rates (the cost per kilowatt-hour of energy used) and standing charges (a fixed daily charge, regardless of how much energy you use) compared to tariffs you can actively choose. Energy suppliers are not incentivised to offer their best rates on deemed contracts, as customers on these agreements have not actively sought them out. This means you are paying a premium for the convenience of an automatic supply.

The financial impact of staying on a deemed contract

Staying on a deemed contract for an extended period can significantly impact your household budget. The higher rates translate directly into larger energy bills. For an average UK home using around 2,500 kWh of electricity and 9,500 kWh of gas per year1, these elevated costs can quickly add up. Many people unknowingly remain on these expensive default tariffs for months, or even years, simply because they are not aware they are on one or do not know how to switch energy supplier. This can result in hundreds of pounds extra spent annually that could have been saved by moving to a formal contract.

Your rights and how to identify your supplier

Even if you are on a deemed contract, you have specific rights as an energy consumer in the UK. Knowing these rights and how to identify your current supplier is the first step towards taking control of your energy supply.

Consumer protections under Ofgem rules

Ofgem, the energy regulator in Great Britain, sets specific rules for deemed contracts to protect consumers. Suppliers are required to inform customers of their deemed status and to offer fair and reasonable terms. Crucially, consumers on deemed contracts have the right to switch suppliers at any time without incurring exit fees. This means you are not tied into an expensive deal and can move to a better tariff as soon as you are ready.

How to find out who supplies your energy

If you have just moved in and are not sure who your energy supplier is, there are straightforward ways to find out:

1. Check your meter or previous bills: The supplier's name might be on the meter itself, or you might find old bills from the previous occupant.
2. For electricity: Use the "What's My Supplier?" tool provided by National Grid Electricity Distribution.
3. For gas: Use the "Find My Supplier" tool, run by Xoserve on behalf of the gas industry.
4. Ask your landlord or letting agent: If you are renting, they should be able to provide this information.

Once you know your supplier, you can contact them to confirm your deemed contract status and current rates.

Switching from a deemed contract: a step-by-step guide

Switching from a deemed contract to a formal energy supply is a clear path to better value. It is a process designed to be straightforward, putting you back in charge of your energy choices.

Gathering necessary information

Before you initiate a switch, you will need a few key pieces of information:

• Your new address and postcode.
• Meter readings: Take accurate readings from your electricity and gas meters on the day you move in. This ensures you are only billed for the energy you use. If you have a smart meter, learning how to read your smart meter can help ensure accuracy.
• Your current supplier's details: Once identified, you will need their name and potentially your account number (if they have provided one).
• An idea of your energy usage: While not strictly necessary for the switch, knowing your approximate annual electricity and gas consumption (e.g., the average UK home uses around 2,500 kWh of electricity and 9,500 kWh of gas per year) can help you compare tariffs more accurately.

Comparing tariffs and choosing a new supplier

With your information in hand, it is time to compare tariffs. Use reputable energy comparison websites to see what deals are available from various suppliers. Look at:

• Unit rates: The cost per kWh for electricity and gas.
• Standing charges: The daily fixed fee.
• Contract length: How long the tariff is fixed for.
• Exit fees: Whether there are charges for leaving early (deemed contracts will not have these, but new fixed tariffs might).
• Customer service reputation: Check reviews and ratings.

Choose a tariff that best suits your usage patterns and budget.

The switching process explained

Switching energy suppliers is simpler than you might think. Here is how it generally works:

1. Choose your new supplier and tariff.
2. Provide your new supplier with your details. This includes your address, meter readings, and current supplier information.
3. Your new supplier handles the switch. They will contact your old supplier and arrange the transfer. This usually takes up to 5 working days.
4. Confirmation: You will receive confirmation from both your old and new suppliers about the switch date.
5. Final meter reading: You might be asked for a final meter reading on the day of the switch to ensure accurate final billing from your old supplier.
6. Enjoy your new tariff: Once the switch is complete, you will start being billed by your new supplier at your chosen rates.

Take control: secure a better energy supply

Moving home can be a busy time, and dealing with energy contracts often falls by the wayside. However, taking proactive steps to move off a deemed contract is one of the most effective ways to manage your household expenses.

The benefits of a formal energy contract

Securing a formal energy contract offers several clear benefits. You will typically gain access to more competitive unit rates and standing charges, leading to lower overall bills. Fixed-term contracts provide price stability, protecting you from sudden market fluctuations. You will also have a clear understanding of your terms and conditions, avoiding the uncertainty of a default arrangement. This move from a passive, default supply to an actively chosen one puts you firmly in control.

Empowering your energy choices

Moving off a deemed contract is a decisive "power play" for UK residents, putting control and better value back into your hands. It is about moving from a state of uncertainty to confidence, ensuring you are not overpaying for an essential service. By choosing a formal energy supply, you are making an informed decision that aligns with your financial goals and preferences.

Fuse Energy offers a clear, straightforward path out of the uncertainty and higher costs of deemed contracts. Our digital-first app provides transparency and control over your energy usage and tariffs, empowering you to manage your supply effectively and avoid default rates. We aim to provide competitive rates, allowing you to move from expensive deemed contracts to a more economical and sustainable energy future, backed by reliable 24/7 human support. Make the power play and click here to switch to Fuse Energy today. Find out more about our mission to make energy abundant here.

References

1. Ofgem. Review of Typical Domestic Consumption Values