Prepayment meters: your rights and how they work

Millions of homes pay for their energy through prepayment meters. But do you pay more if you’re on a prepayment meter?

Smart meter showing weekly budget exceeded
(Image credit: Getty images)

Falling into debt with your energy supplier can have significant repercussions, including being moved onto a prepayment meter.

Typically, if an energy supplier wants to move a customer onto a prepayment meter, it would involve a physical meter being installed at the property.

But, with smart energy meters becoming more common, suppliers can simply switch the setting of the meter remotely, turning it into a prepayment meter.

Gillian Cooper, head of energy policy at Citizens Advice (opens in new tab), said: “Forcibly moving people in debt on to prepayment meters is disconnection by the backdoor. If people can’t afford to top up, they’re at real risk of the heating going off and the lights going out.”

Here we explain how prepayment meters work and if you can avoid being shunted onto one by your energy supplier.

What is a prepayment meter?

There are currently around 7.4 million households on prepayment meters for their energy bills, according to figures obtained by Uswitch, with numbers on the rise.

Prepayment meters, as the name suggests, are a way for households to pay for their energy before they actually use it. 

You put money onto your meter, and that balance then declines over time as you use that energy, whether it’s turning on the heating or cooking dinner. You then need to put more money onto the meter before it runs out entirely, otherwise you won’t be able to use any energy.

It’s a stark contrast from the way many of us pay for our energy. If you’re on direct debit, for example, your supplier will work out how much energy you’re likely to use over a year, and therefore how much your annual bill will be, and then divides that by 12 to calculate your monthly payment. 

If it believes that this has been underestimated then it may look to increase the size of your direct debit, while if it’s been overestimated you can claim that money back.

Why are households put onto prepayment meters?

The main reason that a supplier might want a household to move to a prepayment meter is debt. If you drop into debt with your energy supplier, they may be unwilling to continue to allow you to use energy which you then don’t pay for.

This is countered by a prepayment meter, since you have to have money on the meter in the first place before the energy can be used.

How do you top up a prepayment meter?

Turning your thermostat down by a single degree can help cut energy costs

(Image credit: Getty Images)

There are different ways to top up a prepayment meter, depending on the type of meter you have.

Some households will be able to top up their meter online, however, generally you will need to take your meter key to a shop or Post Office in order to do so.

You’ll be able to tell which shops allow you to do this as they will have the PayPoint or PayZone logos on display. 

Once the money has been put onto the key, you then have to return home and put the key into the meter in order to add the balance.

How much do prepayment meter tariffs cost?

Historically prepayment tariffs have been more expensive than regular tariffs offered by energy suppliers.

The Energy Price Guarantee, which freezes the unit cost of the gas and electricity that we use until April next year does apply to prepayment customers as well as those who pay in other methods, but this doesn’t mean everyone will pay exactly the same unit cost.

An added consideration when it comes to prepayment meters is that your spending becomes much more seasonal.

When the weather turns and we head into the colder months, you will inevitably have to top up your meter more frequently since you are going to have the heating on for longer, and therefore use more energy. 

By contrast, you may be heading to the shop to top up your meter less frequently during the warmer months when your energy use is lower.

Household bills paid by direct debit are calculated as an average of what you would use each month, rather than moving in line with our actual use ‒ your direct debit will be the same in July as it is in December. This can make budgeting far easier, since you know how much will be going out each month on your energy bill. 

How to stop your supplier moving you to a prepayment meter

The energy regulator, Ofgem, has certain rules in place which suppliers have to follow when it comes to moving a household onto a prepayment meter. 

Your supplier cannot move you to a prepayment meter if any of the following apply:

  • You don’t agree that you owe them money, and have told the supplier this. For example, it may be that the debt came from a previous tenant of the property
  • The supplier has not offered you other ways to repay the money you owe, such as through a repayment plan
  • They have not given you at least seven days’ notice before turning up at your home to install the prepayment meter
  • The supplier has not given you at least 28 days in which to repay the debt, before writing to you to set out their plans to move you to prepayment

Should any of these be the case, it’s important to make this point forcibly to the supplier. 

There are separate rules in place for people who are disabled or ill as well. Suppliers are not allowed to move you to prepayment if your situation means you would have issues getting to or reading the meter, or if your condition is made worse by the cold, like arthritis. In addition, if you have medical equipment that requires electricity, such as a dialysis machine, the supplier cannot move you onto a prepayment meter.

Suppliers are also not supposed to move you to a prepayment meter if you have accessibility issues regarding the meter, for example if it’s in a difficult to reach place or you live a significant distance from a shop where you can top up the meter.

If you are not covered by any of these circumstances, and still do not agree to move to repayment, be warned that the supplier could get a warrant to enter your home and install an old-style prepayment meter, or switch your smart meter to the prepayment setting, which would come with it an additional cost of up to £150.

Cooper adds: “The government must ban energy suppliers from using these tactics this winter. And Ofgem has to ensure energy companies aren’t chasing people for arrears they simply can’t pay.”

Can I move off a prepayment meter?

You can ask to be moved off a prepayment meter if it is no longer practical or suitable for you, such as if your circumstances change and one of the factors above now apply to you.

For example, you may be on a prepayment meter at the moment, but if you develop a medical ailment that means you need some sort of electrical equipment at home, such as a stairlift, you could ask your supplier to switch your payment method.

You can also ask to come off the prepayment meter if you have paid off your debt to the supplier, though Citizens Advice explains that before it does this it may want to carry out a credit check on you, or take a deposit.

Any deposit should be for a “reasonable amount”, which essentially means around three months of bills for a household like yours.

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John Fitzsimons
Contributing editor

John Fitzsimons has been writing about finance since 2007, and is a former editor of Mortgage Solutions and loveMONEY. Since going freelance in 2016 he has written for publications including The Sunday Times, The Mirror, The Sun, The Daily Mail and Forbes, and is committed to helping readers make more informed decisions about their money.