Out-of-contract rates apply when a fixed business energy contract ends without a new one in place. Ofgem has documented typical uplifts of 30-80% above fixed-term rates. Microbusinesses now have rollover protections, but the rates themselves remain punishing. This guide explains the costs, your rights, and the fastest way to switch.
Last reviewed: 12 May 2026
What Out-of-Contract Rates Are
When a fixed-term business energy contract ends and no new contract has been agreed, the supplier moves the customer onto out-of-contract rates. These are also called deemed rates or rollover rates, though technically each has a distinct trigger (see the related guide on deemed rates).
Out-of-contract rates are set by the supplier and are not subject to a price cap equivalent for business customers. Ofgem has documented that out-of-contract unit rates are typically 30% to 80% higher than fixed-term contract rates for equivalent consumption profiles.
The customer remains on out-of-contract rates until they sign a new fixed-term contract, switch supplier, or reach a new negotiated agreement with the current supplier.
How a Business Ends Up on Out-of-Contract Rates
The most common route is straightforward: a fixed-term contract ends, the customer does not act during the notice window, and the supplier automatically moves the account to out-of-contract rates. The notice window is typically 30 to 90 days before the contract end date.
Many businesses miss the window because energy contract end dates are not treated with the same urgency as lease renewals or loan maturities. A contract signed three years ago, renewed once by a broker, may have an end date that has not been flagged in any business calendar system.
A second route is contract termination without a replacement. If a business terminates a contract due to supplier failure, a dispute, or a premises change and does not immediately enter a new fixed term, out-of-contract rates apply from the termination date.
The Cost Impact in Practice
Ofgem's non-domestic retail market review included analysis of the out-of-contract rate premium. The regulator found that the premium is substantial, consistent, and not transparently disclosed to customers at the point of contract inception in many cases.
Using indicative figures: a business paying 25p/kWh under a fixed term contract may face 35-45p/kWh on out-of-contract rates from the same supplier. On a 100,000 kWh annual electricity consumption, that is an additional cost of £10,000 to £20,000 per year.
The cost accumulates daily. There is no minimum or maximum period. Businesses that miss the switch window may remain on out-of-contract rates for months while a new procurement exercise is completed.
Microbusiness Rollover Protections
Ofgem introduced specific protections for microbusiness customers regarding rollover contracts. Under these rules, suppliers cannot roll a microbusiness into a new fixed-term contract at the end of the current term without explicit consent.
A microbusiness is defined by Ofgem as a business with fewer than 10 employees (or full-time equivalent), and either an annual turnover or balance sheet total not exceeding 2 million euros, or annual consumption below 100,000 kWh electricity or 293,000 kWh gas.
The rollover restriction means that when a qualifying microbusiness contract ends, the supplier must move the customer to out-of-contract rates rather than automatically binding them into a new fixed term. This protects microbusinesses from being locked into a worse fixed-term contract without awareness, but it does not protect them from the out-of-contract rate itself.
The practical effect is that microbusinesses on expired contracts are on high out-of-contract rates and can switch immediately without exit fees or notice periods tied to a rolled-over contract.
How to Switch Out of Out-of-Contract Rates
The process to escape out-of-contract rates is as follows.
First, confirm your current rate and contract status. Request written confirmation from your supplier of the current unit rate, standing charge, and whether you are on a fixed term or out-of-contract basis.
Second, obtain at least three competing quotes. Contact other suppliers directly or use a broker, bearing in mind that broker commission will be embedded in any brokered quote (see the related guide on broker commission). Request quotes for a 12-month fixed term as a baseline comparison.
Third, check notice requirements. Out-of-contract customers typically face shorter or no notice periods for switching compared to mid-contract termination. Confirm with your current supplier whether a notice period applies.
Fourth, sign a new fixed-term contract with the chosen supplier. Confirm the start date aligns with your intended switch date and obtain written confirmation of the contract terms including the unit rate, standing charge, contract end date, out-of-contract rate that will apply at the end of the term, and notice period requirements.
Fifth, confirm the switch has completed. A switch from one supplier to another takes up to 28 days in most cases. Confirm supply has transferred before the previous supplier relationship is considered closed.
Negotiating with Your Current Supplier
Before switching, it is worth contacting your current supplier to request a retention offer. Suppliers have commercial incentives to retain customers and may offer a competitive fixed-term rate to prevent a switch. This is most effective when you have competing quotes to reference.
A retention offer does not require a broker and avoids the switching process. The risk is accepting a rate that is competitive against a limited set of quotes but not the market's best available rate. Using a retention offer as one data point in a wider comparison is sensible.
The Notice Period Trap
If your contract has not yet ended but you missed the renewal window and been auto-renewed into a new fixed term (which can still happen to non-microbusinesses), you may face early termination fees to exit. These can be substantial, particularly on multi-year contracts with high annual consumption.
If you believe you were auto-renewed without adequate notice or without being informed of the out-of-contract rate at the time of the original contract, this may be a matter for the Energy Ombudsman if you are a qualifying small business.
Editorial disclaimer: This page provides general guidance only and does not constitute energy or legal advice. Rate benchmarks are indicative and based on Ofgem's documented research. Always verify current rates and contract terms directly with your supplier before making any decision.
Frequently asked questions
What are out-of-contract energy rates for businesses?
Out-of-contract rates are the unit rates a supplier charges a business customer when a fixed-term contract has ended and no new contract is in place. Ofgem research indicates these rates are typically 30% to 80% higher than fixed-term equivalent rates. They apply from the day the fixed term ends until a new contract starts or the customer switches supplier.
Can my supplier automatically roll me onto a new fixed-term contract at the end of my term?
For microbusinesses meeting Ofgem's qualifying criteria, suppliers cannot roll the account into a new fixed-term contract without explicit consent. For larger businesses, automatic rollover into a new fixed term remains possible under contract terms. Check your contract for rollover clauses and notice window requirements.
How quickly can I switch away from out-of-contract rates?
Most business energy switches complete within 28 days. Out-of-contract customers typically face shorter or no exit notice requirements compared to mid-contract termination. Confirm with your current supplier whether any notice period applies to your specific situation.
Is there a price cap for business energy out-of-contract rates?
There is no price cap equivalent for business energy customers in the way the domestic price cap works for household customers. Out-of-contract rates are set by individual suppliers and are not regulated as to their maximum level.
What is the difference between out-of-contract rates and deemed rates?
Out-of-contract rates apply when a signed fixed-term contract ends without a new agreement. Deemed rates apply where supply has never been under a formal signed contract, such as when a new tenant occupies premises and takes supply without signing an agreement. Both are typically higher than fixed-term rates but have different legal bases and triggers.
How we verified this
This article draws on the published guidance from Ofgem, the Department for Energy Security and Net Zero, and the relevant primary legislation listed in the Sources section. No aggregator or supplier-produced content was used as a primary source.
