Prepayment meter and pay as you go energy

Prepayment meters, also known as pay-as-you-go meters, are a common way to pay energy bills in the UK. Rather than having a meter where you use energy on credit and pay bills at the end of a billing payment, a prepayment meter uses credit that you buy in advance – either at a local shop or online. Prepayment is quite common in the UK and with the introduction of smart prepayment meters allowing you to pay online, they are a viable option for people across the country, especially renters and landlords looking to keep a close eye on energy use. Smart meters also make it possible to move any excess credit you may have between fuels, from gas to electricity and vice versa.
Last update: April 2022

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Around 5.9 million households in the UK currently pay for electricity in this way, with special pay as you go energy tariffs available from the major and smaller suppliers.

How do you want to pay for your energy? Would you like to pay for what you used after the fact, getting a bill each month or would you rather prepay so that you can be sure exactly what you are spending? If you like the second option, then a prepayment meter is for you.

As you are buying your energy units before you use them, you know exactly how much you will be using and what you are spending. It also means you know how much energy you have left and when you need to top up with more credit. This makes them a good option for people living on a strict budget or who want to monitor their energy use.

What is a prepayment meter and how does it work?

Prepayment is the process of paying for your gas and electricity up front in the form of credit. Obviously, the more energy you use, the faster you will run out and require a top up. In the past, when your credit ran out you were simply ‘left in the dark’. However, these days most prepayment meters are fitted with an emergency credit function. This allows you to set a certain amount of credit to give you more time to top up.

Prepayment meter

Some meters also have a ‘no disconnect’ mode, to prevent you running out of credit at times when it is not possible to top up, such as in the middle of the night. Although the advent of 24 hour top ups makes this less of an issue.

How do prepayment meters work

There are three main types of prepayment meter. These are:

  1. Key meters – these have electronically-coded keys that are specific to your meter and contain your tariff information
  2. Smart card meters – These download information and send it to your supplier every time you top up and can be topped up online
  3. Token meters – These are very old fashioned and seldom, if ever, used these days

Meters are generally topped up by taking your card or key to the Post Office or other PayPoint or Payzone (usually located in small local shops and supermarkets).You can buy bundles of units of power, or kWhs, according to your needs, which helps you keep a closer eye on what you are using and allows you to restrict energy spending. Remember that your energy meter will only work when this card or key is inserted so be careful not to lose it.

Once you have bought the power (there is often a minimum spend) you then top up your meter either in person or by using an app. Your meter will then be charged with that amount of credit. When your credit is running low again, you can simply top up again to ensure you don’t run out.

Prepayment gas meters only have a single rate of payment per unit. However, electricity meters are either single rate or two /three rate meters with different rates per unit depending on the time you use them.

What if I lose my prepayment meter key or smart card?

If you lose your smart card or meter key, get in touch with your supplier as soon as possible. They will issue a new one and send it out as soon as possible. They will also be able to issue you a temporary card from your nearest PayPoint so that you are not without power in the short term. If this is not possible an emergency call out can be arranged but this may come with a fee.

Why use a prepayment meter?

Paying for your energy in advance has a number of advantages. The main one being that it means you don’t get into debt with your supplier and rack up big bills that you can’t afford to pay.

That’s why prepayment meters are often favoured by those on a tight budget or who are trying to cut back on their usage. There has been some criticism of prepayment meter rates in the past, with some arguing that people on a lower income or renters, who are more likely to be on a prepayment meter are being unfairly punished and required to pay more per unit than billed customers.

There are some other downsides to using a prepayment meter, not least that the rates tend to be much more expensive per unit than for tariffs with monthly contracts. But it’s not all bad news.

Prepayment meter: the pros and cons

Let’s start with the pros of pay-as-you-go energy.

  • Gives you greater control of how much you spend on energy and when you spend it
  • Prevents you from running up large bills that are difficult to pay off
  • Avoid debt with suppliers when bills get too much
  • Prepayment meters can also be used to help you pay back debt with suppliers using agreed amounts on each top up.

Now for the downsides.

  • They are more expensive to operate than other types of meter meaning you will pay more for your energy
  • Topping up in person at a local shop can be inconvenient
  • If you are unable to get out and top up or have no web connection then you could end up with no power at all
  • Credit meters let you spread your energy costs throughout the year, but top up meters mean you pay for more energy as and when you use it. This means winters can be very costly
  • You have to remember to charge before holidays or you could end up being cut off when you get back

Prepayment meters and pay as you go

Is a prepayment meter cheaper?

In general, the rates you pay per kWh of energy are more expensive using a prepayment meter. If you were to use the same amount of power with a pay-as-you-go supplier as you would with a credit meter, it would cost more.

However, one of the main advantages of using prepayment is that it helps you to be more aware of what you are using. When you can actually see your credit ticking down it makes you more inclined to try and save power and energy – rather than just worrying about the bill when it arrives.

It all depends on individual circumstances as well as the tariff you have chosen to be on. If you own your own home and are not concerned about your energy use or ability to pay bills, then a prepayment option may not be for you.

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Who is a prepayment meter suitable for?

Prepayment meters are generally suitable for specific types of people. These include landlords who rent their property to tenants. This protects against tenants who leave properties without paying their bills. It also means they don’t have to change the account holder every time a new tenant moves in.

They are also a good option for anyone who has struggled to pay bills in the past or who is keeping a close eye on their usage. People who have fallen into debt with the energy company can also find this an effective way to get out of trouble.

Pay-as-you-go energy tariffs

What is a pay-as-you-go energy tariff?

A pay-as-you-go energy tariff is one that provides energy for meters that allow you to top up. This means a provider supplies your energy and then sells you units of this at a specific rate. You are not tied into a contract and there will be no monthly bills to worry about.

Your energy supplier will provide you with the key or card or have an online app where you can top up and keep a closer eye on your account details. This offers more flexibility and gives you control over your spending. As with contracts, there is a choice of energy tariffs out there from different suppliers, so it’s well worth shopping around to find the most suitable deal for you.

Available pay-as-you-go energy tariffs

There are plenty of pay-as-you-go energy tariffs available from a range of both large and small suppliers. While the cheapest dual fuel energy tariffs on credit meters in the UK will cost about £70 to £74 a month, a prepaid tariff will generally cost a bit more at around £82 to £90. The cheapest pay-as-you-go tariff with British gas will set you back around £91, compared to around £76 for a credit meter tariff. So it does cost more for prepaid energy but there are other benefits.

The best pay-as-you-go tariffs

Currently the cheapest prepaid energy deal on the market is with Omni Energy. This will cost you around £984 a year. However, one of the benefits of prepayment energy is that you control how much you use. Once you have topped up, you can make your energy last a lot longer by being careful about how you use it.

How to find the best pay-as-you-go deal

If you are looking for a good pay as you go energy deal but can’t seem to find the right tariff for you, then get in touch with our team here at Papernest. We can help to match you to a deal that suits your needs and gives you maximum control over how much energy you use. Give us a call on 0330 818 6225.

Can I change a prepayment meter?

If you want to switch from a prepayment meter to a credit meter then you need to get in touch with your supplier. In order to get a credit meter they may need to run a credit check on you to see if you are eligible. If you have a poor credit score then you may be rejected for this kind of payment scheme.

If you pass the credit check, then your supplier will arrange an engineer to come to your home and remove your old meter and install a new one. This could take anything between a few days to a few weeks. However, if you are fitted with a smart meter then it’s possible no switching is necessary.

If you think it is time to switch your supplier and get a better deal, give us a call here at Papernest to find out more.

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Can my supplier force me to have a prepayment meter?

It is technically possible for suppliers to force people to have a prepayment meter. However, this must only happen following a warrant being granted by court order, and as a last resort, following debts. The industry regulator Ofgem is generally against this practice as they prefer to find better ways to resolve differences. It rarely happens and in most cases you are free to choose whatever kind of meter you want.

Does it cost to change from a prepayment meter?

Every supplier is different. Some provide meter switching services for free. Others will charge you a small fee to do so. If you are with one of the Big Six energy companies then you will not have to pay for this service. Get in touch with your supplier to find out more.

If your current supplier does charge for the meter sap, you can always change your tariff to another supplier before deciding to change to a credit meter. However, you may need to be on the prepayment plan for a minimum time period before you can change the meter. So, it always pays to check their policy first.

I’ve just moved to a property with a prepayment meter – what should I do?

If you move into a house with a prepayment meter, the first thing you need to do is to register with the supplier and ensure that you are the current account holder. If you don’t do this you might find that you end up paying the wrong rates, especially if the previous tenant was in debt to the supplier.

Can I change from a prepayment to a standard meter?

If you own the property in almost all cases you should be able to change to a credit meter, as long as any outstanding debts have been paid. If you are a renter then you will need to get the permission of the landlord.

Different types of prepayment meter

As mentioned above, there are three main types of prepayment meter. These are:

  1. Key meters
  2. Smart card meters
  3. Token meters

Token meters are very old fashioned and rarely used these days. Key or card meters are generally topped up in a local store or post office. Smart meters come with apps that allow you to top up online.

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FAQ

How to take a prepayment meter reading

Reading your prepayment meter is easy. Simply press the blue button (red for gas) on the meter and the information you need will appear on the screen. This will include how much credit you have remaining, whether you are in emergency credit mode, how much power you have used, the price per unit and more.

Are there smart prepayment meters?

There are smart prepayment meters which allow you to use an app to top up and manage your energy use. More and more providers are offering these kinds of smart meters, as they can be used for both pay as you go and credit options.

Is a prepayment meter more expensive?

The rates you will pay per unit of energy are more expensive using a prepayment meter. This has led to some criticism as they are often installed in rented property and low income households. However, they can also be an effective way to budget and reduce energy use.

Why does my home have a prepayment meter?

There are two types of payment methods and meters for your energy supply. One is a credit meter where you pay your bills for the amount of energy you have used. The other is a prepayment meter which involves topping up your energy supply with credit through your meter. Around 5.9 million homes in the UK have prepayment meters installed and they are most popular in rented accommodation.

What does a prepayment meter look like?

A prepayment meter looks like an ordinary electricity meter except there may be a slot for a card or key. There will also be a display telling you how much credit you have remaining on your account.

Updated on 24 Jan, 2022

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