If you’ve ever come to the end of an energy contract and thought, “I’ll sort that later,” you’re not alone. It’s an easy thing to push down the to-do list. But leaving your business on out of contract rates can quietly eat into your profits and cost you more than you might expect.
In this blog, we’ll break down what out of contract energy rates actually are, why they matter, and what you can do to avoid overpaying.
What are Out of Contract Energy Rates?
Out of contract rates, sometimes called “deemed” or “default” rates, kick in when your fixed-term energy contract ends and you haven’t agreed a new deal with your supplier. Instead of cutting you off, your supplier keeps your energy flowing, but at a much higher price. These rates are set by the supplier and are usually their most expensive tariffs.
Think of it as a temporary safety net. It keeps your business running, but it’s not designed to be cost-effective.
Why are They so Expensive?
Out of contract rates are higher for a few reasons. Firstly, suppliers are taking on more risk by not having you tied into a fixed agreement. Secondly, these rates are designed to encourage businesses to move onto a proper contract.
The problem is, many businesses don’t realise how much more they’re paying until it’s already been happening for months. Without a fixed rate in place, you’re also exposed to market fluctuations, which means your costs can change quickly and unpredictably.
The Hidden Impact on Your Business
At first glance, the difference in price might not seem huge. But over time, those extra costs can add up.
If your business uses a significant amount of energy, even a small increase in your unit rate can make a noticeable dent in your monthly outgoings. That’s money that could be better spent elsewhere, whether that’s reinvesting in your business or improving cash flow.
There’s also the lack of certainty to consider. With no fixed contract, it becomes harder to forecast your energy costs, which can make budgeting more difficult.
How Businesses End Up Out of Contract
It’s more common than you might think. Contracts come to an end, renewal notices get missed, or priorities shift and energy simply isn’t top of mind.
In some cases, businesses assume their supplier will automatically roll them onto a similar deal. Unfortunately, that’s not how it works.
Once your contract ends, you’ll usually be placed on out of contract rates unless you’ve agreed a new fixed term in advance.
What You Should Do Instead
The good news is that it’s easy to avoid out of contract rates with a bit of forward planning. Ideally, you should start reviewing your options a few months before your contract ends. This gives you time to compare suppliers, explore better rates, and lock in a deal that suits your business.
If you’ve already fallen onto out of contract rates, don’t worry. You can still switch to a new contract and start bringing your costs back under control. The key is not to leave it too long.
Why It Pays to Be Proactive
Staying on top of your energy contracts isn’t just about avoiding higher rates. It’s also about making sure your business is getting the best possible value.
By regularly reviewing your energy setup, you can take advantage of competitive pricing, more suitable contract terms, and potentially even greener energy options. A little bit of attention can lead to meaningful savings over time.
At RMC, we make it simple to stay on top of your energy contracts and avoid unnecessary costs. We’ll help you review your current setup, find competitive rates, and secure a deal that works for your business.
If you’re unsure where you stand or think you might be on out of contract rates, get in touch. We’ll help you get things back on track without the hassle.
