Prepayment meters mean you to pay for your energy before you use it. Is that good or bad? We weigh up the pros and cons.
According to fuel poverty charity National Energy Action, 5.8 million prepayment meters are in use in Britain. Generally speaking, they are used by lower income families, such as those on benefits, lone parents or those with no bank account.
However they can also be used by other customers as some believe this type of payment system helps with budgeting.
What is a prepayment meter?
Prepayment meters allow you to pay for your gas and electricity as you use it. If your energy supplier feels you are unable to manage your monthly energy bills, or if you have a previous debt with your supplier, it will replace your standard credit meter with a prepayment meter, which you will have to top up when you need gas or electricity.
If you're trying to manage your household budget, you can also request to have a prepayment meter installed, though this is not advisable as the gas and electricity you use is charged at a much higher rate than other energy tariffs.
How do prepayment meters work?
Prepayment meters work like pay-as-you-go mobile phones. Instead of paying for your gas and electricity after you've used it, you'll pay upfront by topping-up your account.
There are three types of prepayment meter:
- Token meters
All these meters can be topped up in newsagents and garages, wherever the Payzone or Paypoint symbols are displayed. Some branches of the Post Office also allow customers to top up their cards and keys.
When energy suppliers increase or cut their prices, customers with smartcards or key prepayment meters will automatically have their prices changed, However, there may be a time delay before the changes are implemented.
For households using token prepayment meters, any prices changes need to be made manually and this can take longer. You should check this with your energy supplier.
The pros and cons of prepayment meters
While some households find the prepayment meter system a useful way to help them manage their budget, it is commonly accepted that almost all prepayment gas and electricity meters are set at the supplier's most expensive tariff. That means that the least well-off in society pay the most for their energy.
The energy suppliers say this is because of the extra costs the meters incur, such as the fees for collecting cash via Paypoint, Payzone and Post Office outlets, as well as the installation and maintenance of the meters themselves.
Other than the obvious plus of knowing how much energy you are using, allowing you to monitor your energy consumption, if you develop a fault with your meter or payment, your supplier is are obliged to call at your property to repair the fault within four hours.
Also, if you are a prepayment meter customer and are going away on holiday, you need to ensure you have enough money on your smartcard or key so that any appliances left on, such as fridges or freezers, won't be affected if you run out of credit while away.
Switching prepayment meters
It can be can be difficult for customers to change a prepayment meter once they've had one installed, so they are often seen as a "last resort." If your energy supplier has said they want to install a prepayment meter in your home, contact them and see if you can work out a repayment plan for the money you owe, or whether you are eligible for a social tariff.
If you already have a prepayment meter in your home and you'd like to switch to a standard credit meter, please speak to your supplier. There is normally a charge for the installation of a new meter; however the savings you make with a cheaper tariff should soon pay for the installation charges.