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How do prepayment meters work?

By Rachel England Friday 15 November 2013

Pre-payment

Around 5.9 million people in the UK have a prepayment meter, and as the name would suggest, these meters mean you have to pay for your gas and electricity before you use it, a bit like a pay-as-you-go mobile phone. As long as you have credit on your meter, you’ll be supplied with gas and electricity. When the credit runs out, you’ll need to top up before your energy supply is switched on again.

How do they work?

There are three main types of prepayment meters:

  • Key meters, which have electronically-coded keys specific to your meter and which contain specific tariff information.
  • Smart card meters, which download information about energy usage to send to your supplier every time you top up. These can sometimes be topped up online.
  • Token meters, which are rarely-used these days.

Meters are be topped up by taking your key, card or token to a Post Office or local Paypoint or Payzone (usually a corner shop). The device must be inserted into the meter for gas and electricity to become available, so it’s important it’s kept safe.

Prepayment gas meters will only have a single rate, so you’ll pay the same price for it regardless of when it's used.  Prepayment electricity meters will take one of two forms:

  • Single rate, so you pay the same for electricity regardless of when you use it.
  • A two or three rate meter, where you pay a different price depending on when you use the electricity.

Why are prepayment meters installed in some houses?

Prepayment meters are usually installed in homes when the occupiers have slipped into debt with their energy supplier. This kind of meter makes it easier to budget, and to avoid unexpected bills. People that have a prepayment meter because of outstanding debts will be paying off their debt alongside their gas and electricity, so they’ll be paying for a little more than they’re actually using.

If you move into a property with a prepayment meter, you must inform your supplier immediately, otherwise you could end up inadvertently paying off the previous occupant’s debt.

Some landlords opt to have meters installed in their properties to help avoid their tenants running into debt.

Are prepayment meters more expensive?

In a word: yes. The unit price for your energy is more expensive with a prepayment meter, and the cheapest tariffs offered by suppliers are not usually available to prepayment customers. Plus, older style meters need to be updated with price changes manually, so it could sometimes take months before your meter charges the correct amount, potentially leaving you out of pocket.

Can I shop around for different suppliers if I have a prepayment meter?

Yes, and it’s a good idea to do so, but remember, not all suppliers support prepayment meters and some may charge a fee for transferring their services to your home.

Can I get rid of a prepayment meter?

If you’re in debt to your energy supplier, it’s unlikely you’ll be able to switch from a prepayment meter until your debt is cleared. If you’re not, or if you’ve just moved into a property with a meter, then you should contact your supplier to enquire about switching to a standard meter, although bear in mind some may charge you for this.

Some suppliers will also request that you meet certain conditions first, such as having a current account, or being debt-free for a number of months.

What are the advantages of having a prepayment meter?

  • You’re able to manage your energy consumption more easily, as well as any debts, if you have them.
  • You can’t fall foul of unexpected bills.

What are the disadvantages of having a prepayment meter?

  • Energy is more expensive.
  • It can be inconvenient having to top up your meter, and making sure you always have credit.
  • If for some reason you're unable to top up your meter – for example, you're ill, or the weather’s bad – then you may find your supply is cut off.
  • If you lose or damage your key, card or token then you may face a wait – potentially without energy – while it's replaced (which often incurs a cost).