Prepayment Meters - What They are and How They Work

Read our blog to learn more about prepayment meters - what are they, how do they work and are they fair?

Tell me about prepayment meters

Some people dread receiving their energy bill and find it hard to budget for. Others don't have a great credit history and so providers won't agree to bill them. These people are catered for using prepayment meters.

What are they? 

As the name suggests, rather than receive a bill after you've used the energy, certain meters allow you to pay as you go, topping up your account before you use the power.

Currently, there are 5.8million prepayment meters in use in Britain, meaning around 14% of electricity consumers and just over 10% of gas customers are using them.

The energy provider might install one if it thinks you cannot manage your bills, or you can request one if you think it will make managing your money easier. Most customers using these meters are on lower incomes.

How do they work? 

There are three ways prepayment can work. You might use Smartcards, keys or tokens, all of which can be topped up at various newsagents, garages and sometimes at the Post Office.

Are they fair?

These meters might give you more control but they are almost always a more expensive option. In fact, because the majority of customers using these meters have low incomes, there have been criticisms that poorer homes end up paying more for their energy than more affluent households.

Another issue is that sometimes prepayment customers aren't supported by the necessary infrastructure. For example, people may need to charge cards or buy vouchers, but access to shops might be difficult or limited.

In addition, when energy providers change their prices, Smartcards and keys automatically reflect that, but token meters have to be manually updated. There's a danger that this will result in an unexpected bill.

Can I change to a billing system?

If you're using a prepayment tariff because you owe your supplier money or have had difficulty meeting bills in the past, it may be hard to persuade the energy company to allow you to leave the prepayment set-up.

You should contact your provider and ask if it's possible to switch back, but you may have to pay for a new meter to be installed. On the plus side, the savings you'll make in the longer term should soon cover that cost.

With thanks to Moneysupermarket.com