Prepayment meters (also known as prepaid meters) are a way of paying your energy bills as you go.
Rather than paying a monthly bill for energy, you top up your meter with credit that you buy online or from a local shop as and when you need to.
This is a unique way of paying for energy that means that you never pay for more than the amount that you use. But if you’re thinking about getting a prepayment meter installed, you need to be aware of the risks as well.
In this article, we go through everything you need to know about prepayment meters, and how to get help if you’re struggling to pay for the energy you need.
How does a prepayment meter work?
In most homes, electricity is paid for based on meter readings or an estimate from the supplier after it has already been used by the household. Prepayment meters are unique in that you pay for the electricity first, and then can use that allowance until it runs out or you top up again.
With a traditional prepayment meter, you top it up by going to the Post Office or a designated PayZone or PayPoint shop and paying to put credit on a special key (resembling a computer memory stick) or card. You then simply stick the card or key in your meter at home to activate your credit and use the electricity that you’ve paid for.
With a newer ‘smart’ prepayment meter, you can also top up on your supplier’s website or with an app. Some of these apps give you the option to top up a certain amount automatically. If you have an old style prepayment meter and would like to install a smart one, you can ask your supplier to do this for you for free.
Most prepayment meters will make a noise or alert you if you are starting to run low on energy so you can make plans to top up, but you should keep an eye on your credit anyway so that you are never at risk of being cut off unexpectedly.
There are around 6m households using prepayment meters in the UK. In some cases, they have been installed in homes where the residents have fallen into debt with their supplier while on a regular credit meter, on the supplier’s recommendation. They may be used as a way to repay fuel debt based on how much the customer can afford each week. However, it is quite uncommon for customers to swap to a prepaid meter otherwise.
A recent scandal revealed that British Gas had been routinely sending debt collectors to break into customers’ homes and forcibly install prepayment meters if they were falling behind with payments, even in cases where the customer suffered from a serious disability. Companies can apply to the magistrate’s court for a warrant to force entry into customers’ homes, meaning this practice was technically legal.
British Gas suspended the practice and launched an internal investigation, under heavy criticism from the public and from Grant Shapps, the business and energy secretary. Ofgem, the UK’s energy regulator, has temporarily banned force-fitting prepayment meters until a code of practice can be established.
At the moment, there isn’t an appeals process for forced prepayment meter switches. However, if you feel your supplier has put you on prepay when it shouldn’t have or failed to follow the correct process, you should raise a complaint with them.
The advantages of prepayment meters
The main advantage of a prepayment meter is that you stay in control of the amount you pay for energy. You’ll never pay for more than you use, so you won’t be hit with an unexpectedly large bill, and due to how payment works, it is unlikely that you will go into debt with your supplier.
The disadvantages of prepayment meters
The main problem with prepayment meters is simply that they tend to be more expensive per unit of energy than just using a regular credit meter – this is also known as the “prepayment premium”.
However, the Chancellor announced in his 2023 Spring Budget that this premium would be abolished from July, and prices for prepayment meters would be brought in line with direct debit prices. So, since July last year those on prepayment meters in an average household no longer pay more than those who pay by direct debit.
This means that the energy price cap for an average household of £1,928 also applies to those on prepayment meters.
You don’t get the option that direct debit customers have to spread out your payments evenly throughout the year. This may not sound like a huge problem, but considering that you will probably use more energy in winter, you will likely see your energy spending ramp up in the colder months, which can make budgeting difficult.
What’s more, if you run out of credit, you may be disconnected and be stuck with no electricity until you top up. This can be especially inconvenient if you do not have a smart meter and the shops are shut, leaving you with no way of paying for more energy. Some prepayment meters have a ‘no-disconnect’ mode which means that you won’t be cut off even if you run out of credit, however.
If you don’t currently have a prepayment meter then you most likely won’t benefit much from having one installed, as it will generally be more hassle to top up. If you are struggling to pay your energy bills or are in debt to your supplier, there may be other sources of help available and other ways to pay back your debt that may be preferable to having a prepaid meter installed. Read more in our article What can you do if you can’t pay your energy bills?
Can I switch from a prepayment meter?
If you have a prepayment meter and want to switch to a standard credit meter, you can ask your supplier to install one and they will normally do so for free. Bear in mind that this will mean switching tariffs as well. However, they might refuse to move you if you have a large outstanding debt with them, so you may need to pay this off first before you can switch.
If you’re considering switching your energy provider, it’s worth doing plenty of research so you can be certain you’ve found the best possible deal to suit your needs. Comparison websites such as MoneySuperMarket, Uswitch and Compare the Market enable you to compare the latest energy tariffs, whether you’re looking for a fixed or variable deal.
Get help with your energy bills
While prepayment meters are sometimes recommended by suppliers as a way to manage repaying fuel debt, your supplier can’t push one on you as a first cause of action if there are other options available.
For example, you might be eligible for a cash grant if you have been hit hard by rising energy prices, which you can find out more about in our article Is your energy supplier offering grants to pay off energy debts?
Some other resources that might be helpful to you include our articles The energy bills crisis: what can you do about soaring costs? and Energy saving tips: how to reduce your bills.
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