Deemed rates: the loyalty tax on business gas

Last updated: July 2026

Deemed rates are what a supplier charges when you use gas without an agreed contract. Ofgem says they average 80% more than negotiated rates. Published schedules run from 5.43p to 11.62p per kWh as of July 2026, against 7.9p on an average one-year fix. You can leave at any time, no notice, no fee.

Nobody signs up for deemed rates. That is the point of them. They are the price of not having a price, and your supplier sets every part of it.

What a deemed contract is

If you use gas at a premises without agreeing a contract, the law says a contract exists anyway. It is "deemed". The legal basis is Schedule 2B of the Gas Act 1986, and Ofgem's supply licence conditions 7.3 and 7.4 govern what suppliers can do with it.

The arrangement keeps your gas flowing. The catch: the supplier writes the terms and picks the price, and you were never in the room.

You will also see the term "out-of-contract rates". Suppliers tend to use "deemed" for a new occupier who never had a contract, and "out-of-contract" for a lapsed fixed deal. The schedules work the same way.

How you end up on them

There are three routes in, and none of them involves choosing.

Your contract ended and nobody acted: the most common route. Your fixed term lapses, the renewal letter goes unanswered, and the default rate starts the next day. What that letter means, and the dates inside it, are covered on our business gas renewal(/business-gas-renewal) page.

You moved into the premises: from the day you take responsibility for a site, you are on the incumbent supplier's deemed rates until you agree something. Our change of tenancy page walks through the fix.

Your supplier went bust: Ofgem appoints a supplier of last resort and the new supplier puts you on a deemed contract. Supply continues without interruption. The price is the part to check.

How to tell you are on them

Check your latest bill for the words "deemed", "out of contract" or "default" next to the unit rate. The other giveaway is a sharp jump in price the month after a fixed term ends. Ofgem's licence conditions require suppliers to take all reasonable steps to tell you the deemed terms apply and that better contracts exist, but that letter is easy to miss. If in doubt, ask your supplier which rate schedule you are on. Every deemed schedule is published on the supplier's website.

What deemed rates cost

Ofgem says deemed contract prices are "on average 80 per cent more than rates charged in a negotiated contract". In published supplier schedules for gas, correct as of July 2026, that looks like this.

Sources: supplier published schedules, collated by Purely Energy, updated April 2026.

Set against those, the average one-year fixed gas rate for a small business (10,000 to 50,000 kWh a year) is 7.9p per kWh as of 22 July 2026 (Business Energy Deals). Full contracted rate tables live on our business gas prices page.

The standing charge is where deemed rates sting twice. Published deemed standing charges above run from 100p to 1,877p a day, where a contracted deal typically charges under £1. EDF's 1,877p a day is £18.77 a day, which is £6,851 a year before you burn any gas.

A worked example on units alone. A shop using 25,000 kWh a year on EDF's deemed rate of 11.62p pays £930 a year more than the same shop at the 7.9p contracted average: 3.72p difference times 25,000 kWh. That is money for having no paperwork.

Why the premium? A contracted customer is hedged. The supplier knows your usage, has run a credit check, and has bought your gas ahead of time. On a deemed contract it knows none of that, you can leave any day, and it covers you at short-term wholesale prices. The rate carries all of that risk, and you pay for it.

Whichever rate you are on, the Climate Change Levy (0.801p per kWh on gas from 1 April 2026) sits on top; our CCL guide covers who can claim relief.

Your rights on a deemed contract

This is the part suppliers rarely put in bold, so we will. Ofgem states that on a deemed contract your supplier "cannot prevent you from switching to another supplier, for any reason or at any time", and "cannot require you to give notice before terminating the contract or charge you a termination fee".

Read that again. No notice period. No exit fee. No lock-in of any kind. You will sometimes hear that leaving deemed rates takes 28 days' notice. It does not. The supplier can bill you for the gas you have used, and nothing more.

Micro-businesses (under 10 staff, or under 293,000 kWh of gas a year) get extra protections on ordinary contracts, such as a 30-day cap on termination notice. On deemed rates, everyone already holds the strongest right: leave whenever you like.

How to get off them this week

This is the one page where we will not say staying put can be right. On a fixed deal it often is. On deemed rates it never is, because an agreed contract beats a schedule the supplier wrote alone.

Find your latest bill or take a meter reading, get a quote, and sign. The new supplier handles the transfer, your gas never goes off, and a switch can complete within weeks. The step-by-step lives on our switch business gas page. Every week you wait is billed at the rates in the table above, and no one refunds it afterwards.

Sources: Ofgem, Guidance on Deemed Contracts (November 2023); Ofgem, Understand energy contracts for businesses (accessed July 2026); Ofgem safety net pages (accessed July 2026); supplier deemed schedules collated by Purely Energy (updated April 2026); Business Energy Deals business gas prices (22 July 2026); HMRC Climate Change Levy rates (gov.uk, rates from 1 April 2026). Full methodology: how we source our numbers.