Out-of-Contract Energy Rates: The Silent Profit Killer for Pubs and Bars

Here's a scenario that plays out in pubs and bars across the UK every single day. A landlord signs a 12-month energy contract. Life gets busy — running a pub always is. The contract quietly expires. The supplier rolls them onto a “deemed rate” without fanfare. The bills go up. The landlord assumes it's just energy prices rising. Months pass. Sometimes years.

By the time they realise what's happened, they've overpaid by thousands of pounds. Not because energy prices went up (though they did), but because their supplier moved them onto the most expensive rate category that exists in business energy.

If this sounds familiar, you're far from alone. And the good news is, it's fixable — often within days.

What Exactly Is a Deemed Rate?

When your fixed-rate energy contract ends, you don't get cut off. Your energy keeps flowing. But your supplier switches you from your agreed contract rate to their “out-of-contract” or “deemed” rate. Think of it as the energy equivalent of a hotel mini-bar — technically available, but priced at an outrageous markup.

Deemed rates exist because Ofgem requires suppliers to continue serving you even when you don't have a formal contract. But there's very little regulation on what they can charge. The result is that deemed rates are typically 30–50% higher than the fixed-rate deals available on the open market. Some suppliers push even higher.

Unlike the domestic energy market, where Ofgem's price cap provides some protection, there is no price cap on business energy. Your supplier can charge whatever the market will bear. And when you're not actively shopping around, you're the market.

How Much Are Pubs Actually Overpaying?

Let's put real numbers to this. A typical UK pub uses between 50,000 and 100,000 kWh of electricity per year, with annual energy bills ranging from £10,000 to £28,000. That's driven by cellar cooling systems running 24/7, heating for large floor areas, extended opening hours, glass washers, ice machines, and kitchen equipment if you serve food.

Now, let's say your pub uses 75,000 kWh per year. On a competitive fixed contract, you might pay around 28p per kWh. On a deemed rate, that could jump to 38–42p per kWh. That's an extra 10–14p per unit.

That's £7,500 a year. Over £600 a month. Money that could be paying for staff, stock, refurbishment, or simply keeping the doors open. And with 27% of UK SMEs already struggling with energy bills, this kind of invisible drain can be the difference between profitability and closure.

Why Pubs Are Particularly Vulnerable

The pub and bar sector faces a uniquely difficult energy situation for several reasons:

• Long operating hours: Many pubs are open 12–16 hours a day, seven days a week. Late-night venues push that even further. Every hour the doors are open, the meters are running.
• 24/7 cooling requirements: Your cellar cooling system and beer line chillers never stop. That's £3,900–£7,900 per year just to keep the beer cold.
• Large, hard-to-heat spaces: Pubs tend to have high ceilings, large windows, and open floor plans. Heating these spaces in a British winter is expensive.
• Seasonal variability: Beer gardens packed in summer, empty in winter. Christmas rush followed by a January slump. Your energy needs fluctuate, but a deemed rate doesn't care.

The UK's position of having the highest industrial electricity prices in Europe — 89% above the EU14 median — makes this even harder for pubs that are already dealing with rising costs on every other front.

How to Tell If You're on a Deemed Rate

It's not always obvious. Here are the telltale signs:

• Your bill doesn't show a contract end date, or shows one that's already passed.
• Your unit rate seems higher than what you remember agreeing to.
• You received a letter or email saying your contract had ended (which you may not have noticed among the pile of supplier communications).
• Your bill says “deemed”, “out of contract”, or “variable rate” anywhere on it.
• You simply can't remember the last time you actively chose an energy deal.

If any of those apply, you're almost certainly overpaying. But here's the silver lining: because you're out of contract, you can switch immediately. There are no exit fees, no notice periods, no penalties. You just need to find a better deal.

What to Do Right Now: A Step-by-Step Guide

Step 1: Find Your Current Rate

Check your latest bill for your unit rate (p/kWh) and standing charge (p/day). Write them down. These are the numbers you need to beat.

Step 2: Know Your Annual Consumption

Your bill should show your annual consumption in kWh, or you can calculate it from your monthly usage. This figure determines what tariffs are available to you.

Step 3: Compare the Market

This is where most busy landlords stall. Comparing business energy deals is more complex than domestic — there's no single comparison site that shows everything, and different suppliers offer different rates based on your consumption profile, location, and meter type.

That's where a specialist switching service earns its keep. At Smart Energy Business, we specialise in energy for pubs and bars. We compare rates from our panel of trusted UK suppliers, factoring in your specific usage pattern, and find the deal that genuinely saves you the most money.

Step 4: Switch

The switch itself is straightforward. We handle the paperwork, communicate with your current and new supplier, and ensure there's no disruption to your supply. Your lights stay on. Your cellar stays cold. Your bills go down.

Most switches complete within 2–3 weeks, though you can often secure your new rate immediately.

The Real Cost of Doing Nothing

Every month you stay on a deemed rate, you're handing your supplier money you didn't agree to pay. For a mid-sized pub, that could be £500–£800 per month in overpayments. Over a year, that's a new cellar cooling system. Over two years, it's a significant chunk of a refurbishment budget.

The hospitality sector is under enormous pressure right now. Between rising costs, changing consumer habits, and increasing competition, every pound matters. Energy is one of the few costs where you can make a meaningful saving without changing anything about how you operate. Same opening hours. Same equipment. Same service. Just a better rate.

We specialise in helping hospitality businesses across the UK save on their energy. For pubs and bars specifically, the average saving is £6,600 per year — and it's often significantly more for those coming off deemed rates.

Don't let a contract you forgot about quietly drain your profits. Check your rate. Compare the market. Switch.

Get your free pub energy comparison today →