What are out of contract rates?

If your business isn’t in a contract, you’ll have to pay out of contract rates. This is usually applied when your contract with a supplier runs out and a new contract is not secured. Out of contract rates are normally more expensive than what you’ll pay during your contract. These are not fixed so can fluctuate at any time and will stay in place until you enter into a new contract.

There are a variety of reasons why your business is paying out of contract rates. Most of these will stem from your contract ending without a new one in place. It could be that you started a switch to a different supplier that hasn’t fully gone through by the time that your contract ends. Or you terminated your agreement without taking any further action afterwards. You might also be paying higher rates if you’ve just moved into a new premises.

There’s no set amount for how expensive out of contract rates can be. However, they could be double or more than the average market rate. Depending on your business’ usage, this could be costing your business thousands. Ofgem found that these rates are on average 80% higher than the rates you’ll pay in your negotiated contracts.

One of the reasons why they’re higher than normal rates is because suppliers buy your energy using the futures market. If you’re out of contract, they won’t know how much energy they’ll need to buy. This drives up the prices that you’ll receive for your usage.

The best way your business can avoid being on out of contract rates is to make sure you’re monitoring your contracts. Check any letters or emails that you receive from your suppliers to make sure you know when you’re coming to the end of your contract. If you know this, you’ll be able to secure a better deal with your supplier or switch to save you some money. Our team of experts at Flame Energy can help you monitor your contracts, so you don’t end up on expensive rates.

Your supplier should give you notice that your contract is about to end. When you’re made aware of this, contact one of our energy experts. They’ll use their market analysis to make sure that you’re getting the best deals for your new contract. They’ll work out whether it’s best for you to renegotiate with your current supplier or switch to a new one, taking into account your usage and any current market trends.

If you’ve noticed that your business is paying out of contract rates, the best thing for you to do is to get in touch with one of our energy experts. They’ll be able to contact your supplier to ensure that you’re receiving the best rates for your usage. For one of our customers, we were able to secure a new contract, backdated to credit the business back with around £35 thousand.