Tom Melhuish 3 min read

A Guide to Deemed Contracts

British businesses save a tremendous amount of money each year by agreeing to fixed rates for Water and Energy (electricity and gas) in contracts with utility suppliers.

These utility contracts exist for an agreed term, after which they elapse. Our guide looks at the common scenario where a business has not agreed on a contract with a business utility provider.

What is a deemed contract?

A deemed contract is where your business property continues to be supplied with Water, Electricity and Gas services but it has not agreed on a specific tariff, so instead pays default rates.

Deemed contract default rates are often referred to as out-of-contract rates and are significantly more expensive than contracted rates offered in the market.

If you are on a deemed contract, we recommend using a business utilities comparison service to find a cheaper tariff:

Let’s look at the scenarios where deemed contracts can occur:

Businesses that have never switched water supplier

The water industry for England has only recently deregulated, and Ofwat’s latest reporting shows that 73% of businesses continue to be supplied by their default provider.

If you are part of this majority and have never made a move to change business water supplier, you are likely to be supplied on the basis of a deemed contract initiated on deregulation in 2017.

The default business water rates paid in deemed contracts increase each year and increased significantly in April 2023 due to rising business electricity rates and business gas prices.

Businesses that do not renegotiate water contracts

Commercial water contracts are usually agreed upon with suppliers for 1 to 3 years where the retail business water rates are fixed. When these fixed terms end, your property will continue to be supplied with water services, but you will start paying out-of-contract rates.

Moving business premises

If your business moves into a new property, a business water supplier will already provide water and sewerage services to the property.

From the date you become responsible for the property, you’ll be paying for these water services under a deemed contract.

Can I switch from a deemed water contract?

Yes, in the deregulated water market, businesses can choose their business water supplier.

Use the AquaSwitch free compare and switch service to benefit from cheaper business water rates.

Deemed energy contracts

The vast majority of British businesses regularly switch business energy suppliers entering into fixed tariffs.

When a business energy contract comes to an end, the electricity and gas will continue to be supplied to your business, so it’s easy to forget to arrange another contract. This is the most common scenario where businesses start to pay out-of-contract variable rates or a fixed rollover contract with their business energy suppliers.

Unfortunately, the out-of-contract rates on energy contracts can be incredibly costly, as much as double the fixed business energy tariffs currently offered in the market.

To avoid deemed business electricity prices and gas rates, we recommend using a comparison service before your current contract comes to an end.

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