Around four million households have prepayment energy meters. Rather than paying for their energy after the fact through direct debits or cheques, they add money to cards or keys at local shops or Post Office counters and use these to top up their meters. Smart prepayment meters can be topped up online or through an app.
A price cap limits the rates prepayment energy customers pay, much like a cap limits the bills of households on credit meters. However, the cap for pay-as-you-go energy is set higher: as of April 2022, it’s £2,017/year for a household with typical use, compared to the £1,971/year cap for credit meters. This is despite households with prepayment meters being more likely to be on low incomes and vulnerable.
So, why is this?
Ofgem says the prepayment cap is higher to reflect the higher costs energy suppliers face billing those with prepayment meters, specifically the costs associated with processing top-up payments through Payzone, PayPoint, and the Post Office. It’s cheaper and less effort for suppliers to automatically receive direct debit payments from customers with credit meters.
Furthermore, fewer suppliers offer tariffs for prepayment customers. With less competition, there are fewer cheap pay-as-you-go (PAYG) energy deals available.
If you have a prepayment meter, you may be eligible to switch to a credit meter, which will likely be cheaper and more convenient. If you’re a customer of one of Britain’s largest energy suppliers, you can have the meters switched for free.
However, your supplier won’t offer you a credit meter if you’re in debt on your prepayment meter. Additionally, they’ll run a credit check on you to see whether you’re trustworthy enough to keep up with your bills.
If you don’t want to have a credit check, you can ask to pay a deposit upfront. The deposit should be of a reasonable amount, typically defined as what a household like yours would spend on energy over three months – typically between £150 and £300, although it can be more.
Finally, to qualify for the cheapest direct debit deals available for credit meters, you’ll need a bank account.
Conversely, your energy supplier may move you from a credit meter to a prepayment meter if you repeatedly fall behind on your bills and rack up debt to them. However, they should first offer you other ways to repay the money you owe, such as through a repayment plan or directly out of your benefits, and give you at least 28 days to clear the debt.
Additionally, they can’t move you to a prepayment meter if an illness or disability means it won’t be easy for you to top up the meter or you’d be harmed if your gas or electricity was cut off if the meter ran out of credit.
