Everything you need to know about prepayment meters
Prepayment meters are an alternative way of paying for your gas and electric.
They’re also sometimes known as pay-as-you-go meters.
Instead of paying by Direct Debit or paying bills after submitting meter readings, people with prepayment meters pay in advance before they use the energy.
Currently, around four million homes have these prepayment meters fitted. But they’re not for everyone. In this latest blog, we take you through some of the pros and cons of having a prepayment meter so you’re ready to make an informed decision.
How do prepayment meters work?
It’s a bit like having a pay-as-you-go mobile phone. You pay for credit and then each time you use it, your credit runs down until you pay for more.
Who are they for?
Anyone can have a prepayment meter. They can suit people’s lifestyles, especially if they like to pay for things in advance.
But if people have previously owed lots of money to their energy provider and have struggled to pay bills, prepayment meters may have been installed at their homes to help them budget more effectively.
Many landlords have had prepayment meters fitted to rental properties to prevent tenants running up energy debts.
How can users buy more credit?
There are different types of prepayment meters so the topping up process can vary.
Most have a slot or keyhole on the front, into which you can insert either a prepaid card or key. But it depends on your energy supplier and how new your meter is.
You can buy credit to put on cards or keys at shops that have the PayPoint or Payzone functionality. Most Post Offices can do this. More modern prepayment meters might even have an app that will allow you to top up online or on your mobile phone so there’s no need to leave the comfort of your sofa.
Some older prepayment meters still take coins – but they’re very rare these days, and they can be upgraded for free if you’d like a more modern one.
Newer models can act in the same way as a smart meter, showing you how much energy you’re using in real time using an in-home display.
What are the benefits of having a prepayment meter?
It depends on your circumstances, but prepayment meters can be good for people who want to take control of their finances.
Rather than paying based on meter reading estimates or having to find the money to pay an unexpectedly large bill that’s been run up, people with prepayment meters will always be in control of what they spend. What’s more, people can pay for energy in small amounts rather than having hundreds of pounds to pay at once.
Because users won’t need to go through any credit checks, prepayment meters can be installed and put into use very quickly.
Overall, prepayment meters can mean households manage their energy consumption better, can budget more effectively and prevent them falling into energy debt.
What are the drawbacks of having a prepayment meter?
If you like to have even payments spread throughout the year, a prepayment meter might not be for you. You’ll use more energy in the winter months when it’s colder so you’ll be having to pay more at those times. While you’ll spend less in the summer, it could present problems with household budgeting.
The standing charges apply just as they do on normal meters, so people with prepayment meters will also have to pay a certain amount of money each day too – even if they don’t use any gas or electric that day. And if you don’t have any credit left on your meter, you’ll have to pay those outstanding charges when you next top up.
If having no gas or electricity would cause a serious problem, for example if people in the house have a long-term health condition or disability, the advice is not to be on a prepayment meter. Young children need to be warm, while important medical equipment needs to be usable when needed. And people who have sight or hearing issues may find it hard to see or hear when the meter needs topping up.
Although it’s easier than ever to top up, some people may want to do this in person. This is especially true for people who aren’t tech-savvy. So, if you live in remote locations, have limited access to transport or are housebound, prepayment meters might not be the right option. And if your energy runs out before the shops close, you may face a wait before you can top up again.
Are they more expensive?
Historically, prepayment meters have been more expensive than the other alternatives. But in 2023, the government introduced legislation to end this so-called ‘prepayment penalty’.
From 1 July 2023, prepayment customers should no longer be paying more than people who pay by Direct Debit. It’s estimated this will save people an average of £45 a year.
And just like other ways of paying, there are usually different tariffs you can choose from – although not all energy providers offer prepayment tariffs, they’re usually not as competitively priced as normal tariffs. However, the current situation in early 2023 means the variable rate tariff remains the best option for most people. You can change tariffs like normal meters do.
Can they be removed?
Usually, yes. You can upgrade your old prepayment meter and switch to normal meters – and it normally doesn’t cost you a penny. But your supplier won’t make the switch if you owe them money. If you are a renter, you’ll need the landlord’s permission to change the meter, though.
What to do if you’re struggling to pay
Support is available if you have issues with your prepayment meter or are struggling to pay for gas or electric.
Firstly, contact your energy supplier. They can arrange emergency credit, especially if you’re having difficulty topping up. They may also be able to offer extra support if you are in a vulnerable position.
On April 18, 2023 the Office of Gas and Electricity Markets, (OFGEM) the regulatory body that supervises the operation of the UK gas and electricity industry announced that all British domestic energy suppliers have signed up to an updated Code of Practice and tougher Ofgem oversight of prepayment meters (PPMs) that are enforced under warrant installations or remotely switched without consent (all involuntary installations). Read the full OFGEM statement here.