Deemed energy contracts explained

Moving into a new home or letting an old energy deal expire can land you on a deemed energy contract, often without you realising it. These default agreements are a standard part of the UK energy market, but they typically come with higher unit rates and standing charges than other available tariffs. Understanding what a deemed contract is and how to escape it can save you money and put you back in control of your energy bills.

Understanding deemed energy contracts is the first step to taking control of your energy bills. With Fuse Energy, you can easily switch to a transparent tariff designed to keep your costs clear and manageable. Click here to get started.

What are deemed energy contracts?

A deemed energy contract is a default energy agreement that automatically applies when a customer occupies a property and uses gas or electricity without actively choosing a supplier or tariff. The term deemed means it is considered to be in effect, even without an explicit agreement. These contracts ensure continuous supply, preventing homes from being cut off from essential services.

Definition and purpose

Deemed contracts exist to bridge the gap when a formal energy agreement is not in place. For instance, if you move into a new property, you will automatically be supplied energy by the existing supplier at that address. Until you proactively switch to a new deal, you will be on their deemed contract. The purpose is to maintain supply, but it is rarely the most cost-effective option.

Key characteristics

The key characteristics of a deemed contract are that they are often more expensive than other tariffs, they do not require an explicit agreement from the customer, and they are regulated by Ofgem. These contracts typically feature higher unit rates and standing charges compared to fixed-term or standard variable tariffs you might actively choose. Ofgem, the UK's energy regulator, sets rules for their application and customer protection, ensuring suppliers provide clear information and allow customers to switch easily.

When do deemed contracts apply in the UK?

Deemed contracts apply in several common scenarios, primarily when there is not an active energy agreement for a property. Knowing these situations can help you identify if you might be on one.

Moving into a new property

This is one of the most frequent ways people end up on a deemed contract. When you move into a new house or flat, the energy supply automatically continues with the existing supplier for that property. You become a deemed customer of that supplier until you arrange a new contract in your name or switch to a different provider.

Fixed-term contract expiry

If you are on a fixed-term energy contract and it ends without you renewing it or switching to a new deal, your supplier will typically roll you onto their Standard Variable Tariff. A deemed contract is generally formed when you become responsible for premises an energy supplier already supplies without actively agreeing terms, such as when you move in.

Supplier changes or failures

Less commonly, deemed contracts can arise if your energy supplier goes out of business. Ofgem will appoint a new supplier to take over your account, ensuring your supply is not interrupted. While the new supplier will usually place you on a Standard Variable Tariff, the initial period before a formal contract is established can be considered a deemed arrangement.

Why are deemed rates often more expensive?

Deemed energy rates are almost always pricier than other available options. This is not a punitive measure, but a reflection of the market dynamics and the nature of these default agreements.

Lack of active choice

The primary reason deemed contracts are expensive is the lack of active choice. When you are on a deemed contract, you have not shopped around or committed to a specific deal. Suppliers know this, and their deemed rates reflect the cost of providing a flexible, immediate supply without a long-term commitment from the customer. They do not need to be competitive to attract you, as you are already their customer by default.

Market conditions and price caps

While Ofgem's energy price cap limits how much suppliers can charge for their standard variable tariffs, deemed contracts often sit at or near this cap. For a typical household on a default tariff under the Ofgem Price Cap (1 July to 30 September 2026), electricity costs around 26.11p per kWh. You can learn more about how this cap works in our energy price cap explained article. While the cap prevents prices from spiralling out of control, it is still usually higher than the rates offered on competitive fixed-term deals.

Impact on household budgets

The higher unit rates and standing charges of deemed contracts can significantly impact household budgets. Over time, paying more for every unit of energy consumed adds up, leading to unexpectedly high bills. This can be a particular problem for those who do not realise they are on such a contract until they receive a costly statement.

How to check if you're on a deemed contract

Identifying whether you are on a deemed contract is the first step to taking control of your energy costs. It is usually straightforward to find out.

Reviewing your energy bills

Your energy bill is the most important document for understanding your tariff. For a deeper dive into what each section means, read our guide on understanding your energy bill. Look for the name of your tariff - if it is labelled something like "Standard Variable Tariff," "Default Tariff," or does not specify a fixed term, you might be on a deemed contract or a similar default arrangement. Bills will also clearly show your unit rates and standing charges.

Contacting your energy supplier

If you are unsure after reviewing your bill, simply contact your energy supplier directly. They can confirm your current tariff, its terms, and whether you are on a deemed contract. This is also an opportunity to ask about their other available tariffs.

Understanding your MPAN and MPRN

Your Meter Point Administration Number (MPAN) for electricity and Meter Point Reference Number (MPRN) for gas are unique identifiers for your supply points. These numbers are found on your energy bill. While they do not directly tell you if you are on a deemed contract, they are essential for identifying your supply and for any future switching process.

Switching away from a deemed contract

The good news is that you have clear rights and a straightforward process to switch away from a deemed contract to a more competitive deal.

Your right to switch without exit fees

One of the key protections for customers on deemed contracts is the right to switch without incurring exit fees. Ofgem regulates this, ensuring you can move to a new supplier or tariff at any time without penalty. This means there is no financial barrier to finding a better deal.

Steps to find a better tariff

1. Check your current rates: Understand the unit rates and standing charges of your existing deemed contract from your bill or by contacting your supplier.
2. Compare tariffs: Use an independent price comparison website to compare your current rates with available tariffs from various suppliers. Look for fixed-term deals, which often offer lower rates than standard variable or deemed tariffs.
3. Gather information: You will need your MPAN and MPRN (from your bill), your current energy usage (also on your bill or estimated), and your address.
4. Initiate a switch: Once you have found a suitable tariff, your new supplier will handle most of the switching process.

The switching process

Once you initiate a switch, your new supplier will contact your old supplier and manage the transfer of your account. Under Ofgem's Faster Switching rules, a domestic supplier transfer must be completed within 5 working days of the relevant date. You will not experience any interruption to your energy supply. You will receive a final bill from your old supplier and a welcome pack from your new one.

Ready to move away from potentially expensive deemed rates? Fuse Energy offers straightforward tariffs and a seamless switching process, helping you take charge of your energy costs. Our digital-first approach means clear pricing, real-time usage data, and 24/7 human support whenever you need it. Switching to Fuse is quick and easy, often completed within 5 working days. Click here to switch to Fuse Energy today and discover a simpler way to manage your home's energy. You can also learn more about our mission by clicking here.