A deemed contract is an energy supply arrangement that applies automatically when someone uses gas or electricity at a property without agreeing a tariff, such as after moving into a new home. Its rates are set by the supplier and are often higher than negotiated deals.
In one line: A deemed contract is the default, often costlier, energy supply that applies automatically when energy is used without an agreed tariff.
How a deemed contract works
A deemed contract arises by law when a customer consumes energy without choosing a tariff, typically on moving in. The existing supplier continues supply on its deemed rates until a new tariff or supplier is agreed.
If a deemed contract charges 28p per kWh against a standard tariff at 25p, a household using 250 kWh a month pays 70 GBP instead of 62.50 GBP, an extra 7.50 GBP until it switches to an agreed deal.
There are no exit fees for leaving a deemed contract, so a customer can switch tariff or supplier without penalty once they arrange one.
Deemed contract vs a chosen tariff
A deemed contract is imposed by default with no agreement and usually higher rates, while a chosen tariff is one the customer actively signs up to, often at a better price.
Unlike a fixed deal, a deemed contract carries no exit fee, so moving off it onto an agreed tariff is penalty-free.
Primary source: Ofgem: Get help with energy