Out-of-contract rate
What is an out-of-contract rate?
If a business energy contract has run its course and nobody got round to signing a new one, the supply doesn’t switch off. It keeps running. The price you pay changes, though. The supplier moves your account onto what’s called an out-of-contract rate, almost always shortened to OOC. Those rates were written into the original contract for exactly this scenario, and they almost always work out a lot higher than what you’d pay on a fresh fixed deal. Often 30 to 100 per cent higher. Sometimes more. They apply by default, every day, until you sign a new contract or switch supplier. The longer the gap, the more it adds up.
Out-of-contract rates hit every utility. business electricity, business gas, and business water. Once a fixed term lapses without a renewal in place.
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Out-of-contract rates are one of the most common reasons UK business energy bills jump unexpectedly. They are not strictly the same thing as deemed rates (which apply where there has never been a contract. Typically after a move-in). OOC sits in between. There was a contract, it has ended, and the customer has not yet replaced it. The mechanism is the same; the trigger is different.
What an out-of-contract rate is
The OOC rate is the per-kWh unit rate, plus standing charge, that a supplier applies when:
- A fixed-term contract has reached its end date.
- No new contract has been signed before that end date.
- The supply remains active (no move-out, no disconnection).
The OOC rates are written into the original contract. The customer agreed to them at the point of signing, even if the original conversation barely touched on what they would be. Suppliers must give notice that the contract is ending; once the contract end date passes and no new agreement is in place, the OOC rates apply automatically from the next billing period.
How an account goes out of contract
Three usual triggers:
- Renewal not signed. The customer received the supplier's renewal offer but did not sign by the deadline. The contract expires; OOC rates kick in.
- Renewal missed entirely. The supplier's renewal letter went to the wrong address, was filed and forgotten, or never reached the right contact. Same outcome.
- Switch attempted late. The customer started a switch close to the contract end but did not complete it in time. There can be a gap of weeks on OOC rates before the new supplier picks up.
The supplier is required to give notice the contract is ending (usually 60 days before for micro-businesses). Outside that protection, larger customers depend on their own diary.
OOC vs deemed rates
The two are often used interchangeably but they are technically different:
| Feature | OOC (out of contract) | Deemed |
|---|---|---|
| Trigger | A contract has ended without renewal | No contract has ever been agreed (typically after move-in) |
| Rate source | OOC rates in the original contract | Supplier's published deemed tariff |
| How long it lasts | Until a new contract is signed | Until a new contract is signed |
| Typical cost vs fixed | 30-100% higher | 30-100% higher (often higher than OOC) |
For the customer, the effect is similar. A default tariff that is materially more expensive than a negotiated alternative. The legal mechanism behind it differs. See the live deemed rates glossary entry for the deemed-side detail.
How OOC rates are set
OOC rates are commercial. Set by each supplier and disclosed in the contract terms. There is no industry cap. Rates typically reflect:
- A premium over the supplier's base wholesale + margin assumption. Often 30-80 per cent.
- The supplier's view of risk. OOC customers cost more to serve (admin, payment risk, churn).
- Wholesale market conditions at the time the rates were set. An OOC rate fixed in a quiet market becomes more punishing in a high-price market.
Because OOC rates are written into the contract years before they apply, they can drift significantly out of step with current wholesale pricing. Sometimes higher than the prevailing market, occasionally close to it.
Example cost impact
To give a sense of how the cost gap scales over time, here is an illustrative example. Assume a fixed-contract unit rate of 26 p/kWh and an OOC rate of 42 p/kWh. A 16 p/kWh gap.
| Annual consumption | Typical site | Extra cost after 90 days on OOC | Extra cost after 6 months on OOC | Extra cost after 1 year on OOC |
|---|---|---|---|---|
| 15,000 kWh/year | Small office or shop | £600 | £1,200 | £2,400 |
| 60,000 kWh/year | Mid-size restaurant, gym, or showroom | £2,400 | £4,800 | £9,600 |
| 200,000 kWh/year | Larger industrial unit or multi-floor office | £8,000 | £16,000 | £32,000 |
Example only. OOC rates vary from supplier to supplier (and from contract to contract), so the gap on your own bill will differ. Check your supplier portal or your last renewal letter for the actual OOC figures.
How long can OOC rates last?
There is no automatic limit. The OOC rates apply until either:
- The customer signs a new contract with the existing supplier.
- The customer switches to a new supplier (the switch typically takes 4-6 weeks for non-half-hourly meters, longer for HH).
- A Change of Tenancy closes the account.
Customers have stayed on OOC rates for years without realising or acting on it. There is no protective mechanism that ends them automatically.
How to avoid going out of contract
The practical steps:
- Diary the contract end date. Plus 90 days before, as a renewal review trigger.
- Start the renewal process early. 60-90 days before contract end gives time to compare and switch cleanly.
- Get the OOC rates out of the contract. They are normally in the schedule or terms. Knowing them changes the urgency of the renewal.
- If you use a broker. Make sure they have a signed Letter of Authority well before the renewal window so they can act quickly. See the LOA glossary entry.
- Set up a fallback. If a switch is mid-process at contract end, ask the existing supplier to extend by a short window (or sign a short fixed rather than fall onto OOC).
What to do if you are already on OOC
If the bill has already moved to OOC rates:
- Confirm the position. Check the latest bill. The unit rate or contract status will show OOC or out-of-contract pricing. Compare to the OOC schedule in the original contract.
- Act quickly. Each month on OOC is materially more expensive than a contracted alternative. Start a renewal or switch the day you spot the issue.
- Negotiate the existing supplier first. A short call asking for a fresh fixed offer often gets a tariff materially below the OOC rate, with no switching effort. They want to keep you on book.
- Run a market comparison. Either directly or through a broker. Switching can put downward pressure on the incumbent's offer.
- Consider backdating. Some suppliers, when they spot a long OOC period on their own customer, will agree to backdate a new contract a few months. Worth asking.
Related entries: deemed rates, Change of Tenancy, Letter of Authority, bill validation. For the gas-specific deeper guide, see Clearsight’s out-of-contract gas rates article.
Frequently asked questions
What is an out-of-contract rate?
The price a UK business pays for gas or electricity once a fixed-term contract has ended and no new contract has been signed. OOC rates are set by the supplier, typically 30 to 100 per cent higher than contracted rates, and apply by default until the customer takes action.
Is an out-of-contract rate the same as a deemed rate?
No, but the effect is similar. Deemed rates apply where no contract has ever been agreed (typically after a move-in). OOC rates apply where a contract existed and has expired. Both are default supplier tariffs, usually well above contracted rates.
Why am I on an out-of-contract rate?
Most commonly because a fixed-term contract reached its end date and a renewal was not signed in time. Sometimes the renewal letter was missed or went to an old address. The supplier moves the account to the OOC rates written into the original contract.
How much more do I pay on out-of-contract rates?
Typically 30 to 100 per cent more than equivalent contracted rates, sometimes more. The exact gap varies by supplier and by how stale the OOC rates are relative to current wholesale pricing.
How long can a supplier keep me on out-of-contract rates?
Indefinitely, until you sign a new contract, switch supplier, or close the account. There is no automatic limit. Customers have stayed on OOC for years without an intervention.
Are out-of-contract rates regulated?
Not directly capped. Suppliers must disclose them in the original contract and notify when a contract is ending (60 days for micro-business). Beyond that, OOC rates are commercial terms.
Can I escape an out-of-contract rate by switching?
Yes. Switching to another supplier or signing a new contract with the existing one ends the OOC period from the changeover date. The new tariff applies from that point; you cannot retrospectively avoid the period already on OOC.
How do I check my OOC rates before they apply?
They should be listed in the schedule or terms of your current contract. The supplier should also state them in the contract-end notification letter. Ask the supplier directly if neither is to hand.
Can I backdate a new contract to avoid OOC charges?
Sometimes. Suppliers occasionally agree to backdate a renewal a few weeks or months, particularly where the customer was unaware of the contract end. It is always worth asking; not always granted.
What is the difference between OOC and rollover?
A rollover is an automatic renewal at the supplier's posted rates, usually for another fixed term (now restricted for micro-businesses). OOC is the default tariff where no rollover or renewal has happened. Both are higher than a fresh fixed but mechanically different.
Does going out of contract affect my credit rating?
No. Being on OOC rates is a tariff state, not a debt or default. Credit problems only arise if bills go unpaid, which is unrelated to whether the account is on contracted or OOC rates.
How do I find out if I am on out-of-contract rates?
Check the latest bill. The unit rate, standing charge, and contract status section should indicate OOC or default-rate pricing. The supplier portal or a call to customer service can confirm. If unsure, a broker can pull the data from the supplier on your behalf with a Letter of Authority.