Out-of-contract rates are the most expensive form of business electricity and gas supply in the UK market. They apply by default when a fixed contract ends and the customer does no further work. The premium over a freshly negotiated fixed deal commonly runs between 30 and 80 percent, depending on supplier and meter type. The escape is straightforward in principle and time-bound in practice.
TL;DR
- Out-of-contract rates are the supplier's standard rates applied when a previous fixed contract has ended without a new one signed; deemed rates are the equivalent where no contract has ever been signed at the meter.
- The typical premium over a fresh fixed deal sits between 30 and 80 percent on unit rate, with standing charges often elevated too, based on published supplier rate cards in May 2026.
- The customer is not contractually locked in on the out-of-contract side; a standard 28-day notice (or in some cases shorter) lets the customer leave once a new supplier is registered.
- Ofgem applies a microbusiness deemed rate cap in some contexts as part of the Standards of Conduct framework, set against a reasonable margin test rather than a hard p/kWh ceiling.
- The catch is the switch timing: the Ofgem 17-day switching commitment means a clean escape is possible in under three weeks, but only once the new supplier accepts the registration.
Last reviewed: May 2026
What out-of-contract rates actually are
Out-of-contract (OOC) rates are the default contractual terms that apply when a fixed-term business energy contract ends and no new contract is signed. The customer continues to consume energy at the meter and the supplier continues to supply it, because the supply licence requires continued supply. The legal basis for the continued supply is the supplier's standard terms, which include the out-of-contract rate.
Deemed rates are conceptually similar but apply where no contract has ever been signed at the meter. Common deemed scenarios include taking over a new commercial premises and inheriting whatever supplier was there, or a meter coming back into use after a period without supply.
Both rates are set unilaterally by the supplier. There is no negotiation. The customer either accepts the rates by continuing to consume, or arranges a switch.
For microbusiness customers, Ofgem's Standards of Conduct apply a reasonableness test to deemed rates, meaning the supplier should not set them at a level that lacks justification against cost. Ofgem has discretion to investigate where rates appear unreasonable. For non-microbusiness customers, the protection is contractual rather than regulatory.
How big the premium typically is
The size of the out-of-contract premium varies by supplier and meter type. Drawing on published supplier rate cards and broker-reported figures in May 2026, the typical pattern shows out-of-contract unit rates running 30 to 80 percent above the supplier's own fresh-fixed offer for the same meter.
The reasons for the premium are partly cost-related (the supplier is buying energy for an unhedged short-term position rather than against a forward curve) and partly margin-related (out-of-contract customers are, by definition, not price-shopping). The 2022 Ofgem changes pushed back on the margin component for microbusiness, but the underlying premium remains.
A worked example. A retail unit in Sheffield consuming 35,000 kWh of electricity per year is approaching contract end. A fresh fixed deal at 26 pence per kWh would cost roughly 9,100 pounds per year on the unit rate alone, before standing charges. The same site rolled onto an out-of-contract rate of 38 pence per kWh, a 46 percent premium, would cost 13,300 pounds per year. The difference, 4,200 pounds, is the annualised cost of failing to switch. On a quarterly view, the gap is 1,050 pounds; on a monthly view, 350 pounds. The standing charge, typically 50 to 80 pence per day on a non-half-hourly business meter, often runs higher on the OOC tariff than on a fresh fixed offer too. Adding the standing charge differential extends the gap by another few hundred pounds per year on a low-consumption site. None of this requires any commercial sophistication on the supplier's side: the OOC rate is set unilaterally in the supplier's published standard terms.
Over a quarter (three months), the same comparison delivers an extra cost of roughly 1,050 pounds. The numbers are illustrative; actual rates vary by supplier and DNO region.
The 28-day rule and why the customer is not locked in
Standard out-of-contract terms across most UK business energy suppliers do not lock the customer in for a fixed period. The customer is free to leave once a new supplier is registered, subject to a notice period that is typically 28 days but varies by supplier.
This is the key asymmetry to understand. A fixed contract has early termination charges that can be substantial. An out-of-contract supply does not. The supplier holds the customer on the high rates through inertia, not through contractual penalty.
The implication is that escape is fast in legal terms. The constraint is operational: a new supplier has to be selected, the contract has to be signed, and the registration has to complete. Each step takes time.
For microbusiness customers post-2022, the operational route is supported by Ofgem's switching commitments and the supplier's microbusiness obligations. For non-microbusiness customers, the operational route is the same in mechanics but without the underlying regulatory backstop.
The Ofgem switching commitment and the 17-day target
Ofgem's switching commitment, brought in through reforms to the central settlement and metering processes and operationalised through 2024, targets a 17-day switch process for eligible meters across the domestic and microbusiness non-domestic market. The 17 days runs from successful registration with the new supplier to switch completion.
For non-microbusiness SMEs, the same central infrastructure handles the switch in the same timeframe, although the Ofgem commitment is framed primarily around domestic and microbusiness customers.
The practical implication for a customer on out-of-contract rates is that the escape window is short once the new supplier accepts the registration. The slow steps are upstream of registration: quote-gathering, contract signature, credit and KYC checks at the new supplier, and any documentation required (proof of business address, meter details, current supplier confirmation).
A customer on out-of-contract rates who selects a new supplier on day one and completes registration paperwork on day three can typically have the switch completed by day twenty. Three weeks of premium-rate exposure is the typical minimum cost of an unmanaged contract end.
The microbusiness deemed rate cap, where it applies
Ofgem does not operate a single fixed p/kWh cap on non-domestic deemed rates equivalent to the domestic price cap. What it does have, since the 2022 Non-Domestic Market Review changes, is a reasonableness test applied through the supplier licence Standards of Conduct.
Suppliers are required to ensure deemed rates for microbusiness customers reflect a reasonable margin over the cost of supply, and Ofgem can investigate cases where rates appear to be set at unreasonable levels. The framework is principles-based rather than a hard ceiling.
In practice, the reasonableness test has compressed the most extreme deemed rate premiums but has not collapsed the gap entirely. A microbusiness in 2026 facing deemed rates still faces a meaningful premium over a fresh fixed offer, just typically not as extreme as the pre-2022 outlier cases.
For non-microbusiness deemed customers, the reasonableness test does not apply in the same form. The contractual deemed rate is the operative rate, subject to general law on unfair contract terms but not to a specific Ofgem cap.
The escape process compresses into a four-step timeline. The table below shows it day by day.
| Day | Action | Notes |
|---|---|---|
| 1 | Gather quotes from at least three sources | Direct from supplier and, if used, broker channels with limited-scope LOAs. |
| 2-3 | Select supplier and contract length, sign contract | Read principal terms and termination window for the new contract. |
| 3-5 | New supplier conducts credit and KYC checks | Provide proof of business identity and meter details promptly to avoid delay. |
| 5-7 | Registration submitted with old supplier | Old supplier receives notification through central settlement system. |
| 7-24 | 17-day switching window runs | Switch completes; new contract supply begins. |
The table compresses the timeline tightly. Real-world friction (missing documentation, credit query, supplier-side queue) commonly extends the process by a week. Three to four weeks of total out-of-contract exposure is a realistic best case from a standing start.
What slows the switch down
Five things commonly delay the escape from out-of-contract rates.
Credit checks at the new supplier. A business with thin trading history or recent county court judgments may face additional credit requirements (security deposit, parent company guarantee, shorter contract length). The credit query is usually answerable but takes days, not hours.
Meter details mismatches. The MPAN (electricity) or MPRN (gas) on the new contract has to match the meter in the supplier's central settlement record. Typing errors, multi-meter sites with confusion about which meter is being switched, and historical data quality issues at the central system all cause registration rejections.
Outstanding bills at the old supplier. A supplier with an outstanding final bill claim against the customer may flag an objection through the switching process. The objection is typically resolvable but adds time.
Letter of Authority issues. A new broker without a valid LOA, or a multi-LOA conflict where a different broker holds authority, slows registration. The broker channel introduces dependencies that direct-from-supplier registration avoids.
Half-hourly metering complexity. For half-hourly settled meters, the data flow involves additional parties (Meter Operator, Data Collector, Data Aggregator). Switches involving HH meters take slightly longer than the standard non-half-hourly process.
Here is where it breaks: every additional party in the switch chain is another source of delay, and the customer pays out-of-contract rates for every day of delay.
What not to do
Three actions that commonly make the situation worse.
Signing a contract with the first broker who calls offering escape from out-of-contract rates. The broker channel is most active around contract end and OOC moments precisely because customers are pressured. Pressure is not the same as a good deal.
Signing a long fixed contract without checking the new supplier's principal terms. A 36-month fixed at a rate close to the OOC rate is not an escape, it is a longer version of the same problem.
Telling the old supplier about an intended switch without engaging a new supplier first. The new supplier registration triggers the switch. Notifying the old supplier alone does nothing operationally.
A specific UK pattern reported in Citizens Advice non-domestic energy commentary: SMEs in mid-2024 and 2025 who tried to escape OOC by direct termination notice to the old supplier without a new contract in place ended up still on OOC rates, because no new registration had been initiated. The route out requires registration with someone new.
Regional and meter-type variation
The OOC premium varies by DNO region partly because the underlying network and policy costs vary, and partly because supplier pricing strategies treat different regions differently. A site in the SSEN North region in the Highlands carries different network cost components in any supply contract than a site in UKPN London. The OOC mark-up is applied on top of that already-variable baseline.
For Northern Ireland sites, the parallel framework under the Utility Regulator NIAUR applies, with separate supplier list and switching arrangements. The general principle that out-of-contract supply costs more than fresh fixed contract supply holds across both regimes, but the specific mechanics differ.
For gas, the OOC mechanics are broadly similar but the supplier set differs from electricity in some cases. Sites with both fuels need both contracts to be in fresh-fixed status to avoid premium exposure.
Editorial disclaimer. KaelTripton is an independent UK publisher. This article is editorial, not personal financial or energy procurement advice. Rates, caps, grant levels and supplier offers move; verify any figure with the named primary source before acting on it. KaelTripton does not earn commission from suppliers or brokers mentioned.
Frequently asked questions
How much more do out-of-contract rates typically cost?
The premium over a fresh fixed deal commonly runs between 30 and 80 percent on unit rate, with standing charges often elevated as well. The exact figure varies by supplier, DNO region and meter type, and moves with wholesale market conditions.
Is the customer locked into out-of-contract terms?
No. Standard out-of-contract terms typically allow the customer to leave with notice of 28 days or sometimes less, once a new supplier is registered. The high rates apply through inertia rather than contractual penalty.
Does Ofgem cap out-of-contract or deemed rates for business customers?
There is no fixed p/kWh cap equivalent to the domestic price cap. For microbusiness, the Standards of Conduct apply a reasonableness test on deemed rates following the 2022 rule changes. For non-microbusiness, the rates are governed by contract terms and general law.
How fast can a business escape out-of-contract rates?
The Ofgem switching commitment is a 17-day process from successful registration. Adding quote-gathering, contract signature and credit checks, three to four weeks from standing start is the realistic best case.
What is the difference between deemed and out-of-contract rates?
Out-of-contract rates apply where a previous fixed contract has ended and the customer has not entered a new fixed deal. Deemed rates apply where no contract has ever been signed at the meter, typically after taking over a new premises. Both are set unilaterally and both usually sit above fresh fixed offers.
Sources
- Ofgem - Non-Domestic Market Review, 2022 microbusiness rule changes and Standards of Conduct
- Ofgem - Energy advice for businesses, switching commitment and contract guidance
- Citizens Advice - Energy supply consumer commentary, out-of-contract and switching
- Ombudsman Services Energy - sector reports and microbusiness jurisdiction
- Utility Regulator NIAUR - Northern Ireland framework, separate from Ofgem
- DESNZ - Department for Energy Security and Net Zero, supplier licensing
