What does a business energy broker do?
Find out what a business energy broker does, how brokers are paid, the Ofgem rules that protect you and how to choose a good broker for your business.
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When a fixed business energy contract ends and nothing new is agreed, your supplier does not cut you off. Instead it moves you onto its out of contract rates, and for many small businesses that is where bills jump.
Below we explain what out of contract and deemed rates are, why they cost so much, the rules that protect small businesses and the simple steps to avoid them.
What are out of contract energy rates?
Out of contract rates are the prices your supplier charges once your fixed term ends without a renewal or switch. They are sometimes called rollover, default or variable business rates.
Because there is no price cap for business energy, suppliers set these rates themselves. They are usually well above the rates on a new fixed contract, and they can change at short notice. A business that ignores its renewal letter can end up paying far more for exactly the same energy.
Deemed rates are different
Deemed rates apply when you use energy at a premises with no contract at all. This usually happens when you:
- Move into new business premises and start using the existing supply.
- Take over a business without setting up a contract in your name.
- Have a contract end in a way that leaves no agreement in place.
Like out of contract rates, deemed rates are among the highest a supplier charges. If you have just moved in, contact the supplier straight away and compare deals rather than staying on deemed prices.
Out of contract and deemed rates at a glance
| Out of contract rates | Deemed rates | |
|---|---|---|
| When they apply | Your fixed contract ends with no new deal | You use energy with no contract in place |
| Typical cause | Missed renewal date | Moving in or taking over a business |
| Cost | Usually higher than a new fixed deal | Usually the highest rates on offer |
| How to get off them | Agree a new contract or switch supplier | Agree a contract or switch supplier |
The renewal rules that protect microbusinesses
Ofgem has extra protections for microbusinesses, which broadly means firms with fewer than 10 employees and a turnover or balance sheet under €2 million, or that use a relatively small amount of energy.
- Renewal terms in advance. Your supplier must send a statement of renewal terms before your fixed contract ends, showing your end date, the new prices it is offering and what happens if you do nothing.
- Limits on automatic rollovers. A supplier can only roll you onto a new fixed term if it gave you those renewal terms and you did not ask to leave. A rollover cannot last more than 12 months.
- Clear contract information. Your contract end date and notice terms must be easy to find on your bills and contract.
- Broker fees on show. Suppliers must show any broker commission included in your contract, so you know what you are paying for advice.
Larger businesses have fewer protections, so the details in your own contract matter even more.
Why businesses end up out of contract
The most common reasons we see are simple:
- The renewal letter went to an old address, a former manager or a spam folder.
- Nobody in the business knew the contract end date.
- The business moved premises and the supply was never put on a contract.
- The owner meant to compare deals but left it until after the end date.
How to avoid out of contract rates
- Find your contract end date. It should be on your bill, your contract or your supplier’s online account. If not, call your supplier and ask.
- Put it in your calendar. Add a reminder six months before and again three months before the end date.
- Compare early. Many suppliers quote up to 12 months ahead, so you can lock in a price without rushing.
- Give notice correctly. If your contract needs written notice to leave, send it in good time and keep a copy.
- Check the new contract is live. Make sure your new deal starts the day after your old one ends, so there is no gap on default rates.
Already on out of contract rates?
You can usually move to a new fixed deal at any time, as out of contract tariffs rarely have exit fees. The sooner you act, the less you pay. Compare business electricity and business gas prices, or see what typical business electricity rates look like today.
The quickest route is to tell us when your contract ends using our free quote form. A trusted UK business energy broker will compare suppliers for you and help you avoid paying out of contract rates again.