When a business electricity contract comes to an end, it’s important to know what happens next. If you don’t arrange a new agreement or switch supplier, your business may be placed onto an out-of-contract or deemed tariff, depending on your circumstances and supplier.
These rates can be less competitive than rates available through a negotiated business electricity contract.
For business owners, understanding what happens when a contract expires can help avoid unexpected costs and give you more time to compare business electricity options.
In this guide, we’ll explain what being out of contract means, how it can affect your electricity costs, what deemed energy rates are, and what you can do if your business is already out of contract.
Important: Business electricity contracts and supplier terms vary. Always check your specific agreement and supplier’s current terms before making decisions.
What Does “Out of Contract” Mean for Business Electricity?
A business is generally considered out of contract when its agreed electricity contract has ended and it has not entered into a new fixed-term agreement or another applicable contract arrangement.
For example:
Contract start: 1 January 2025
Contract end: 31 December 2026
If the business does not arrange a new contract before the existing agreement ends, the supplier may move the business onto an applicable out-of-contract or deemed tariff.
The exact terminology and arrangements depend on the supplier and circumstances.
The important point is that your electricity supply doesn’t necessarily stop simply because your contract ends.
Instead, your pricing arrangement may change.
Does Electricity Stop When a Business Contract Ends?
No, your electricity supply doesn’t normally stop simply because your fixed-term contract has ended.
Your business premises will generally continue receiving electricity, but the commercial terms under which you receive it can change.
This is why businesses need to pay attention to their contract end date.
The risk isn’t necessarily losing electricity overnight.
The bigger concern is potentially paying a less competitive rate while you remain without a new agreed contract.
What Is an Out-of-Contract Electricity Rate?
An out-of-contract rate is a rate applied when a business continues receiving electricity after its previous contract has ended without arranging a new agreed contract.
The rate is determined according to the supplier’s applicable terms.
It may be significantly different from the rate that was available under your previous fixed-term agreement.
This is one reason businesses should avoid treating the contract end date as something they can ignore.
What Is a Deemed Business Electricity Rate?
A deemed rate is generally a rate that applies when a business occupies premises and consumes electricity without having actively agreed a contract with the supplier for that supply.
This can happen, for example, when:
- A business moves into new premises
- A previous occupier leaves
- The business hasn’t arranged a new contract
- A contract has ended and no new agreement has been established
Ofgem explains that businesses moving into premises can be placed onto a deemed contract if they begin using energy without agreeing a contract with the supplier.
The precise terms and pricing depend on the supplier.
Out of Contract vs Deemed Contract
These terms are related but shouldn’t automatically be treated as identical.
Out of Contract
This generally refers to a situation where an agreed business energy contract has ended and the business continues receiving energy without entering into a new fixed-term or alternative agreement.
Deemed Contract
A deemed contract can arise when a business occupies premises and uses energy without having agreed a contract with the supplier.
The circumstances can therefore differ.
Always check the terminology and terms used by your supplier.
Why Do Businesses End Up Out of Contract?
There are several common reasons.
1. The Business Forgot the Contract End Date
Owners have many responsibilities, and business electricity renewal can easily get overlooked.
Unfortunately, forgetting the date doesn’t stop the existing contract from ending.
2. The Business Delayed Making a Decision
Some businesses know their contract is ending but wait too long to compare options.
This can leave them without a new agreement when the old one expires.
3. The Business Is Moving Premises
A company preparing to move may hesitate to sign a new long-term electricity contract.
This can create additional complications because electricity arrangements are connected to specific premises and supply points.
4. The Business Is Waiting for Better Prices
Some businesses deliberately delay renewal because they expect electricity prices to fall.
This can be risky.
Energy prices can change in either direction, and there’s no guarantee that waiting will produce a cheaper deal.
5. The Business Changed Ownership
When a business changes ownership or management, energy contracts can sometimes be overlooked during the transition.
New management should check the electricity supplier and contract status as early as possible.
Are Out-of-Contract Business Electricity Rates More Expensive?
They can be, but you shouldn’t assume that every supplier’s out-of-contract rate is always higher than every available market rate.
The actual price depends on:
- Supplier
- Tariff
- Market conditions
- Business circumstances
- Consumption
- Contract terms
Ofgem notes that businesses can often pay more when they’re on a deemed contract than if they negotiate a contract with a supplier.
The key takeaway is:
Don’t assume your existing rate continues after your contract ends.
Check what rate applies and do business energy comparison.
How Much Could Being Out of Contract Cost?
There isn’t a universal figure because out-of-contract pricing varies between suppliers and over time.
However, even a small difference in the unit rate can become significant for businesses with high electricity consumption.
For example, consider a hypothetical business using:
100,000 kWh per year
If one rate is:
25p/kWh
and another is:
30p/kWh
The difference is:
5p × 100,000 = £5,000
That’s £5,000 in annual consumption charges before considering electric standing charges, taxes and other costs.
This example is purely illustrative.
The lesson is that businesses with substantial electricity consumption should pay close attention to their contract pricing.
How Do I Know If My Business Is Out of Contract?
Start by checking your latest electricity bill and contract documents.
Look for:
- Contract start date
- Contract end date
- Tariff name
- Current unit rate
- Standing charge
- Renewal information
- Supplier contact details
You can also contact your supplier directly and ask:
“Is my business electricity contract currently in contract, or am I on an out-of-contract or deemed arrangement?”
Ask them to confirm the applicable:
- Unit rate
- Standing charge
- Contract status
- Contract end date
- Renewal options
Getting this information in writing can be useful.
What Happens If Your Business Electricity Contract Has Already Ended?
If you’ve discovered that your business is already out of contract, don’t panic.
The first step is to establish exactly what arrangement you’re currently on.
Then:
1. Contact Your Supplier
Ask for confirmation of your current tariff and pricing.
2. Check Your Consumption
Review your recent electricity bills to understand how much electricity you’re using.
3. Compare Available Contracts
Look at alternative business electricity options.
4. Check the Full Cost
Don’t compare only unit rates.
Look at:
- Unit rate
- Standing charge
- Contract length
- Additional costs
- Taxes
- Payment terms
5. Choose an Appropriate Contract
Once you’ve compared your options, decide whether to remain with the supplier or switch.
The sooner you understand your position, the sooner you can make an informed decision.
Can You Switch Business Electricity Supplier While Out of Contract?
If you’re out of contract, you may be able to switch supplier, but the exact process depends on your circumstances and supplier terms.
The important thing is to establish whether you have:
- A fixed-term contract
- A deemed contract
- An out-of-contract arrangement
- Another type of agreement
Ofgem provides business energy guidance covering contracts and switching.
Before switching, make sure your new supplier has the correct information about your premises and electricity supply.
How to Avoid Going Out of Contract
Prevention is usually easier than dealing with unexpected pricing afterward.
1. Record Your Contract End Date
Put the date into your business calendar.
2. Set a Reminder
Set reminders well before the contract ends.
3. Monitor Your Electricity Usage
Know approximately how much electricity your business consumes.
4. Keep Your Bills Organised
Your latest bills contain important information needed for business electricity comparisons and quotations.
5. Start Comparing Options Early
Don’t wait until the last day.
6. Understand Your Notice Period
Your contract may contain specific requirements regarding switching or termination.
7. Don’t Automatically Accept the First Renewal Offer
Compare the available options before making a decision.
What Should You Compare When Leaving an Out-of-Contract Rate?
When comparing a new business electricity contract, look at the entire pricing structure.
Unit Rate
How much will you pay per kWh?
Standing Charge
How much will you pay per day?
Contract Length
How long will you be committed?
Additional Charges
Are there other costs included?
Taxes and VAT
How are these treated?
Payment Terms
How and when will you be expected to pay?
Supplier Service
What level of customer support is available?
This gives you a much more accurate comparison than simply looking for the lowest advertised unit rate.
Should You Stay With Your Existing Supplier?
Not necessarily.
Staying may be appropriate if:
- The supplier offers competitive pricing
- You are satisfied with its service
- The contract terms suit your business
- Switching doesn’t offer meaningful benefits
Switching may be worth considering if:
- Another supplier offers better overall value
- Your existing supplier’s service has been poor
- Your business requirements have changed
- You want different contract terms
The best choice depends on your business.
What If You’re Moving Into New Business Premises?
This is an important situation.
If you move into a commercial property and begin consuming electricity without arranging a contract, you may be placed onto a deemed contract with the existing supplier.
Ofgem specifically advises businesses moving into premises to contact the existing supplier and provide meter details and other information.
Don’t wait until you’ve been in the premises for months.
Contact the supplier as soon as possible.
For more information, see our upcoming article:
Business Electricity When Moving Premises: What You Need to Know
Out-of-Contract Electricity Checklist
If you think your business is out of contract, check:
- Current supplier
- Current tariff
- Contract status
- Contract end date
- Unit rate
- Standing charge
- Recent electricity consumption
- Meter information
- MPAN
- Notice requirements
- Alternative supplier quotes
- Contract length
- Payment terms
- Additional charges
- VAT and taxes
Once you have this information, you can make a much more informed decision.
Business Electricity Out of Contract FAQs
What happens when a business electricity contract ends?
Your electricity supply normally continues, but the pricing arrangement may change. Depending on the circumstances, you could move onto an out-of-contract or deemed arrangement.
Are out-of-contract business electricity rates expensive?
Out – of – contract electricity rates can be less competitive than negotiated business electricity contracts, but pricing varies by supplier, market conditions and business circumstances.
What is a deemed electricity contract?
A deemed contract can apply when a business occupies premises and uses electricity without actively agreeing a contract with the supplier.
Can I switch supplier if my business is out of contract?
You may be able to switch, depending on your circumstances and supplier terms. Check your current status before arranging the switch.
How can I avoid being out of contract?
Keep track of your contract end date, check your notice period and start comparing renewal or switching options well before the existing agreement expires.
Does electricity stop when a business contract ends?
Generally, the electricity supply does not simply stop because your contract has ended. However, your pricing and contractual arrangement may change.
Should I renew before my business electricity contract ends?
It’s generally sensible to review your options before the end date so you have time to compare suppliers and understand the consequences of not arranging a new contract.
Can an energy broker help if I’m out of contract?
A business electricity broker may help you compare available suppliers and contracts. Before using one, ask how they are paid and whether any commission or fees are included in the quoted price.
Final Thoughts
Being out of contract isn’t necessarily a crisis, but it’s something businesses should address promptly.
The most important thing is to find out exactly what tariff and contract arrangement you’re currently on.
If your previous agreement has ended, check your unit rate, standing charge and other applicable costs, then compare alternative business electricity contracts.
Don’t assume that your previous pricing automatically continues after your contract expires.
And if you’re approaching the end of your current agreement, don’t wait until the final day to start thinking about renewal.
Knowing your contract end date and reviewing your options early can help you avoid unnecessary costs and make a more informed decision about your next business electricity contract.
Don’t Stay Out of Contract
Your contract may have ended, but you don’t have to stay on your current arrangement. Compare business electricity deals and explore your options.