A guide to prepayment meters (prepaid gas and electric)
Around 4 million households in the UK are using prepaid energy. Here’s what you need to know about prepayment meters and what they might mean for your energy bill.
Around 4 million households in the UK are using prepaid energy. Here’s what you need to know about prepayment meters and what they might mean for your energy bill.
What’s a prepayment meter and how does it work?
With a prepayment meter, you pay in advance before you use energy. It’s a bit like having a pay-as-you-go mobile phone instead of a contract. Using a prepayment meter is an alternative to monthly direct debits or Payments On Receipt of Bill (PORB).
Prepayment meters typically have a slot or keyhole on the front, which takes a prepaid card or key. While the method of topping up can vary depending on your energy supplier and meter, all cards and keys will need credit adding before you insert them into the meter.
Post Offices and shops with a PayPoint or Payzone facility offer top-up services, and many energy suppliers now offer top-ups via text, app or online.
With a prepayment meter you also have to pay a standing charge, so even if you don’t use any power your credit will still be used to pay for this.
Charges vary from region to region and supplier to supplier, so how much you pay will depend on the tariff you’ re on, where you live and which provider you use.
Can I have a smart meter with a prepayment meter?
Yes, you can ask your energy provider to upgrade your existing meter to a smart one for free. If you’re renting a property, you’ll need the landlord's permission to change the meter.
Smart meters send readings directly to your energy provider and come with an in-home display. This allows you to see how much energy you’re using in real time in pounds and pence.
There are other benefits too, like being able to top up your account online or via an app. This means there’ll be no need to go to the shops to add credit as it will all be done remotely, and you won’t have to mess around with inserting keys or cards into your meter. You’ll also be notified if you’re about to run out of credit.
If you have an existing smart meter, it may be that it can be switched to pre-pay remotely by your supplier.
Who would use a prepaid meter?
Prepayment meters are sometimes used by people who’ve had problems paying their energy bills in the past. That’s because it may help them keep track of exactly what they’re spending.
A prepaid meter can also be used to help repay outstanding debts to your energy supplier. For example, if you add £20 to a card you could pay £5 towards the existing debt and use £15 for new energy, once you put the card in the meter.
In some debt situations an energy company may insist on installing a prepaid meter, but this should not happen to vulnerable customers.
Some landlords choose to fit meters in rental homes to avoid receiving unexpected, unpaid bills with interest when tenants leave a property.
But generally speaking, most people will be better off using a standard credit meter and paying by direct debit – as the very best energy deals are typically not available to prepayment customers.
What are the pros and cons of prepayment meters?
Prepayment meters suit some people who need complete control over how much they spend on energy, but they’re not right for everyone, especially if you’re looking for a great deal.
Advantages
- Easier to manage your finances if you’re in debt or struggling to budget
- No large, unexpected bills to pay
- No credit check or bank account needed
Disadvantages
- Gas and electricity more expensive than with standard meters
- Best energy deals not available to prepayment customers
- Lost cards or meter keys can cause problems
However, it was announced in the March 2023 budget that the government promised to bring prepayment charges in line with direct debit customers. From 1 July 2023, customers on pre-payment meters will be compensated through the Energy Price Guarantee for the higher cost of their energy compared to direct debit customers. And energy regulator Ofgem is currently seeing how to put in place a long-term solution to equalising the charges.
What is the prepayment price cap and the Energy Price Guarantee and how do they apply to prepayment meters?
A ‘safeguard’ tariff, capping the amount a supplier can charge you per kWh for electricity or gas was introduced by Ofgem in 2017.
The cap limit applies if you:
- Use a prepayment meter to pay for your gas or electricity in advance (including through a token-operated meter)
- Have the Government’s Warm Home Discount
and are on a standard variable tariff, or a tariff you haven't chosen – sometimes known as a default or deemed tariff.
But the cap is currently superseded by the government’s Energy Price Guarantee.
This also caps the unit cost of gas and electricity for each unit of energy used, not total bills. It’s higher for prepayment meters than it is for direct debit customers.
Energy Price Guarantee rates in Great Britain for average direct debit and prepayment customers
| Tariff (GB average) |
1 Jan - 31 March 2023 |
1 April - 30 June 2023 (pence per kilowatt hour excluding VAT) |
| Standard variable tariff paying by direct debit | 35.84p/kWh for electricity 10.7p/kWh for gas |
34.19p/kWh for electricity 10.46p/kWh for gas |
| Prepayment meter with a variable contract | 31.43p/kWh for electricity 10.30p/kWh for gas |
30.52p/kWh for electricity 10.04p/kWh for gas |
|
Prices vary by region. Rates are based on GB averages. See the regional rates for gas and electricity in full on GOV.UK |
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If the price cap, which is being calculated every three months by Ofgem, falls below the price guarantee then the price cap will apply.
You don’t need to apply for the Energy Price guarantee – it’ll be applied to the price you pay for energy so it will mean that your top-ups will last longer if you have a prepayment meter. However, it’s not an absolute limit on how much you’ll pay – that still depends on how much you use.
If you can't afford to top up your prepaid meter, see our guide on what to do if you can't afford your energy bills.
Find out more about the Energy Price Guarantee and the energy price cap.
Does having a prepaid meter make energy cheaper?
Unfortunately, no. Prepaid meters are often put in place for those struggling to pay for their energy, and the tariff rates tend to be higher than those for a standard meter.
Can I still save money on a prepaid meter?
In normal times, you could potentially still save money on a prepaid meter. Most energy providers will have at least one prepaid tariff on offer, so it may be possible to shop around for a good deal from your existing supplier. If they only have a single prepaid tariff, you can shop around to see if a better-priced tariff might be available from a different supplier.
Take a look at our energy saving tips for more ways to save on your energy bills.
Can I change my prepayment meter to a regular one?
You can change your prepaid meter to a regular one as long as you meet certain conditions. If you inherit a prepayment meter through a house move, contact your energy supplier to tell them you’re the new owner. You should then be able to change your meter if you want. The supplier may run a credit check as part of the direct debit or PORB process.
If you’ve had problems with bills in the past but are now back on your feet, you might be able to switch from a prepaid meter to a regular meter too. This will probably involve a credit check though and may come on the condition that your account is 100% debt-free.
Finally, check whether your energy supplier charges to change a meter. Some do and some don’t, so it’s worth shopping around if there’s a charge involved.
How do I get a new card or key for my prepayment meter?
If you’ve lost your gas or electric meter key or card, or if it’s been damaged or stopped working, contact your energy supplier to find out what to do. They’ll probably give you the option to pick up a new meter key or card from a Payzone or PayPoint outlet or a Post Office. You may be given a reference number to take with you.
Alternatively, your supplier can post a new gas or electric key or card to you, but it can take three to five working days. You may be charged for getting a new key or card, especially if it’s not the first one you’ve lost.
Don’t worry about going without energy, as you should be able to top up without a card using your top-up card premise number (a numbered code). Your supplier will give you this when you contact them.
It may be possible to get any credit on a lost prepayment meter key or card refunded, and to put the refunded amount on the new card. But you might have to provide proof of buying the credit.
