What are Deemed Contracts?
In the UK energy market, a deemed contract is a type of energy supply agreement that automatically comes into effect when a consumer moves into a new property or their previous contract expires without a new one being put in place. These contracts are designed to ensure an uninterrupted supply of energy, but they can often come with higher rates than negotiated contracts.
Understanding the Implications of Deemed Contracts
Higher Prices
One of the primary drawbacks of deemed contracts is that they typically have higher energy tariffs compared to negotiated contracts. Energy suppliers often set these rates higher to account for the uncertainty and administrative costs associated with deemed contracts.
Limited Contract Terms
Deemed contracts generally have shorter contract durations, often with no fixed end date. This means consumers may be locked into these contracts for an indefinite period, limiting their ability to switch to a better deal.
Potential for Retroactive Billing
In some cases, energy suppliers may attempt to retroactively bill consumers for energy usage during the period when a deemed contract was in place. This can lead to unexpected and potentially significant charges for the consumer.
Tips for Managing Deemed Contracts
- Actively Monitor Your Contract - Regularly check your energy bills and supplier information to ensure you're not on a deemed contract without your knowledge.
- Negotiate a New Contract - If you find yourself on a deemed contract, contact your energy supplier and negotiate a new, fixed-term contract with more favorable rates.
- Consider Switching Suppliers - If your supplier is unwilling to negotiate a better deal, shop around and compare offers from other energy providers to find a more suitable contract.
- Understand Your Rights - Be aware of your consumer rights and the regulations governing deemed contracts, so you can advocate for yourself and avoid unfair practices.
Key Statistics and Industry Insights
- According to Ofgem, the UK's energy regulator, around 20% of domestic energy customers are on deemed contracts.
- Deemed contract tariffs are typically 20-30% higher than the cheapest available fixed-term contracts in the market.
- The average annual energy bill for a household on a deemed contract is around £1,400, compared to £1,100 for a fixed-term contract.
- Ofgem has introduced new rules to improve transparency and fairness in deemed contracts, including requiring suppliers to provide clear information about these contracts and the ability to switch.
Conclusion
Deemed contracts can be a confusing and costly aspect of the UK energy market for consumers. By understanding the implications of these contracts and taking proactive steps to manage them, you can ensure you're getting the best possible deal for your energy supply. Remember to stay vigilant, negotiate with your supplier, and be willing to switch providers if necessary to secure a more favorable contract.