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Deemed energy rates: 7 checks before your pub or restaurant starts trading
A pub or restaurant can start using energy before the supplier has finished setting up the account. When that happens, the usage may be billed on deemed or out-of-contract rates. That can turn an ordinary handover into an expensive first few weeks.
Deemed energy rates: 7 checks before your pub or restaurant starts trading
A pub or restaurant can start using energy before the supplier has finished setting up the account. When that happens, the usage may be billed on deemed or out-of-contract rates.
That can turn an ordinary handover into an expensive first few weeks.
Most incoming tenants, licensees and operators know a Change of Tenancy is needed. The problem is usually one missing detail: the wrong meter, a delayed account, unclear readings, an old occupier still linked to the supply, or no confirmed contract position before the site starts using power and gas.
For pubs, restaurants, hotels, breweries and other hospitality premises, deemed rates can put immediate pressure on cashflow. In practice, they are often around twice as high as a suitable contracted rate, depending on the supplier, site and market conditions.
This checklist covers what to confirm before the trading start date, what to chase if the supplier process drags, and how to avoid finding out from the first bill that the site has been on the wrong rate.
Why deemed rates are the handover risk to watch
Ofgem explains that a business can be placed on a deemed contract when it moves into premises and uses gas or electricity before agreeing a contract with a supplier.
That can happen even when the handover is planned. The new operator may have keys, staff on site, contractors working, fridges running and cellar cooling switched on while the supplier is still checking evidence or matching the account to the right meter.
A deemed contract keeps supply live. It can also mean higher unit rates, higher standing charges and uncertainty while the account is being corrected.
Before opening day, answer one question:
Are the right meters, under the right business name, on the right billing basis, from the right date?
1. Confirm the trading start date, not just the handover date
The key date is the point from which the new operator becomes responsible for energy usage. That might be the completion date, lease start date, licence start date or another agreed responsibility date.
For hospitality sites, usage often starts before the first service. Contractors need power. Cleaners use hot water and lighting. Refrigeration, cellar cooling, extraction, kitchen prep, alarm systems and test runs can all build usage before the doors open to customers.
If the account is not ready at that point, the site may already be using gas and electricity before a contract is in place. Deemed or out-of-contract billing can start there.
Before trading starts, make sure the responsibility date is written down and shared with the supplier, adviser, landlord or outgoing occupier where relevant.
2. Make sure both electricity and gas are covered
Do not treat the handover as one energy account until you have checked the supplies. Many hospitality sites have both electricity and gas. Some have more than one electricity meter. Larger or older premises can be less straightforward than they first appear.
Before trading starts, confirm:
- which supplier is responsible for electricity
- which supplier is responsible for gas
- whether both supplies need a Change of Tenancy
- whether both supplies have contract options ready
- whether any supply is already being billed on default, deemed or out-of-contract terms
Supplier notification is only the start. The important check is whether the correct supplier has accepted the correct details for every supply serving the site.
3. Match the meters before the supplier sets up the account
Meter details are one of the easiest places for a handover to go wrong.
A pub may have separate gas and electricity supplies. A restaurant may have more than one electricity meter. A hotel may have plant, kitchens, bars and guest areas linked to records that are not obvious from a walk-round. Some meters are badly labelled, tucked away in shared service areas or still tied to historic site information.
Before trading starts, collect:
- MPAN for electricity
- MPRN for gas
- meter serial numbers
- clear photos of each meter
- photos showing the reading and meter identity together
- full site address, including unit or premises details
- meter location notes
If the wrong meter is attached to the account, the site can lose weeks to billing disputes, delayed contracts or corrected invoices. While that is being unpicked, usage may continue to build on the wrong billing basis.
4. Take opening readings on the responsibility date
Opening readings are one of the simplest ways to protect the incoming operator.
Take them as close as possible to the responsibility date. Photograph the reading and the meter serial number together, and keep the images dated.
This separates the previous occupier's usage from the new operator's usage. It also gives the supplier a clear opening point if the first bill is estimated, delayed or disputed.
A typed reading in an email is useful. A dated photo showing the meter and reading is stronger.
5. Check the supplier has opened the right account
Submitting the Change of Tenancy does not finish the job. Check whether the supplier has opened the correct account for the correct legal entity, meters and start date.
Confirm:
- legal entity name
- company number, if applicable
- billing address
- responsibility start date
- supply numbers
- meter serial numbers
- opening readings
- account number or reference
- whether any usage is currently on deemed or out-of-contract rates
The incoming operator should not inherit the previous occupier's energy debt. Even so, old-account confusion can slow down the new setup if the responsibility date, meter readings or site records are unclear.
Ask the supplier to confirm that the previous occupier's usage has been separated from the incoming operator's usage.
6. Do not wait for the first bill to discover the rate
The first bill after a pub, restaurant or hotel handover can arrive weeks into trading. By then, the site may already have used a lot of electricity and gas.
If that usage has been billed on deemed or out-of-contract rates, the cost has already started to build. Check the rate position before the first bill lands.
After the Change of Tenancy has been submitted, chase the points that affect billing:
- Has the supplier accepted the evidence?
- Has it confirmed the responsibility start date?
- Has it matched the correct meters?
- Has it opened the account under the right legal entity?
- Has it issued contract documents where needed?
- Has it confirmed whether any usage is being billed on deemed or out-of-contract rates?
The first bill should confirm what you already know, not reveal the rate for the first time.
7. Compare the deemed rate against contract options quickly
Deemed rates are not usually designed as a long-term position. They are often materially higher than contracted business energy rates and, in NEC's experience, can often be around twice as high as a suitable contract option.
The exact difference depends on the supplier, site, meter type, usage profile and market conditions. Operators should compare the deemed rate against available contract options rather than assuming the first offer is right.
When reviewing options, check:
- unit rate
- standing charge
- contract length
- start date
- payment terms
- pass-through or non-commodity conditions
- termination and renewal dates
The cheapest headline unit rate is not always the cleanest contract for a hospitality site. A pub, restaurant or hotel with tight cashflow needs to understand the full billing position, not just the pence-per-kWh figure.
What NEC would collect before trading starts
If NEC is helping before or during a handover, send:
- lease, tenancy, licence or completion evidence
- legal entity details
- site address
- MPAN and MPRN, if available
- meter serial numbers
- meter photos
- opening readings
- current supplier details, if known
- previous occupier details, where available
- signed letter of authority
- intended trading start date
The letter of authority matters. Without it, an adviser may know what needs fixing but still be unable to get account information or progress updates from the supplier.
The earlier this information is gathered, the more room there is to sort the account and contract position before trading usage builds.
How NEC helps reduce deemed-rate exposure
NEC helps hospitality operators keep the energy side of a handover moving. That includes checking meter details, gathering supplier evidence, arranging authority, contacting suppliers, chasing account setup, reviewing contract options and querying bills where the rate, period or meter does not look right.
For pubs, restaurants, hotels, breweries and multi-site operators, the aim is practical: reduce unnecessary time on deemed or out-of-contract rates and get the site onto the right billing basis as early as possible.
Final checklist before opening day
Before trading starts, check:
- Have the electricity and gas supplies both been identified?
- Have MPAN, MPRN and meter serial numbers been recorded?
- Have opening readings been photographed?
- Has the supplier accepted the new legal entity?
- Has the previous occupier's account been separated?
- Has the responsibility start date been confirmed?
- Is any usage currently being billed on deemed or out-of-contract rates?
- Has a contract option been reviewed before meaningful usage builds?
A clean energy handover needs more than a supplier notification and a bit of hope. The site needs to be on the right billing basis before weeks of trading usage have built up.
If you are taking over a site, handing one to a new licensee or managing multiple hospitality premises, speak to NEC before the trading start date. We can help check the details, deal with the supplier process and move the account towards the right contract as early as possible.