What is a Deemed Contract?
Deemed contracts aren’t particularly common, but they are an option that is available to businesses, and an option that many small businesses do consider. Quite simply, a deemed contract occurs when businesses begin to use utilities without entering into a formal contract with business energy suppliers. Businesses are charged for the energy they use, but business electricity prices on deemed contracts are often much higher compared to regular price plans. A deemed contract can also occur when businesses fail to renew their contract following termination or switch to a new supplier, but still continue to use electricity in the premises.
Is a Deemed Contract a Good Idea for Small Businesses?
If you’re a new start-up business, or have recently moved into a new premises, a deemed contract might seem like a good idea on the surface – it gives you the time you need to gain a better understanding of your business energy needs without having to commit to a full contract. However, it’s important to keep in mind that deemed contracts will never offer the best rates, and businesses could find themselves paying out more than they need to. A study by Ofgem reports that around 10 percent of small businesses are currently on deemed contracts for their business electricity, and are typically paying 80 percent more than they would have had they entered into a full contract designed for new businesses or SMEs.
There are many different deals available for start-up businesses and SMEs that are much more cost effective than deemed contracts. Businesses can easily identify these deals through comparing price plans from major business electricity suppliers to find the best rates for their needs. Price comparison websites can streamline the comparison process, helping businesses to locate the most suitable services and find the best business gas prices and best business electricity prices available.