Prepayment meters explained

A prepayment meter, also known as a pay-as-you-go (PAYG) meter, requires you to pay for your energy before you use it. Much like a pay-as-you-go mobile phone, you add credit to the meter to receive your gas and electricity supply. This system can offer a clear way to manage your energy budget, but it also comes with specific features and considerations you should understand.

Understanding how prepayment meters work is key to managing your energy costs effectively. Fuse Energy offers clear pricing and smart meter insights to help you stay in control of your energy usage. Click here to see how easy it is to switch.

Understanding prepayment meters

What is a prepayment meter?

A prepayment meter is a device in your home that lets you pay for gas and electricity in advance. Instead of a monthly bill for energy already used, you add credit to the meter, and the supply continues until that credit runs out. This approach can help you manage energy usage and avoid large, unexpected bills.

How do prepayment meters work?

Prepayment meters work on a simple 'pay, then use' principle. You add money to your meter via a top-up key, card, or sometimes through an app or online. As you use energy, the meter deducts the cost from your balance. When credit is low, the meter usually alerts you to top up. If the balance hits zero, your energy supply may cut off until you add more credit.

Most prepayment meters also include a daily standing charge - a fixed fee for being connected to the energy network. This charge is deducted from your balance even if you use no energy. If you do not top up, these standing charges can build up as debt.

Key features of prepayment meters

Prepayment meters include features to help prevent immediate disconnection, especially at inconvenient times:

• Emergency credit: This offers a temporary amount of credit, which you can activate when your regular balance is low. It acts as a buffer, giving you time to top up before your supply is cut off. You must pay back any emergency credit used with your next top-up.
• Friendly hours: Many suppliers provide 'friendly hours' (sometimes called 'friendly credit') when your energy supply will not disconnect, even if your credit runs out. These typically cover evenings, weekends, and public holidays, ensuring you do not lose power when top-up points might be closed. Any energy used during friendly hours is deducted from your next top-up.

Advantages and disadvantages of prepayment meters

The benefits of paying upfront

For many, prepayment meters provide a clear way to manage household budgets. Paying for energy in advance allows you to monitor your spending closely and avoid large, unexpected bills. This can be especially useful if you prefer to spread the cost of energy across smaller, more frequent payments.

Potential drawbacks and challenges

Despite the budgeting control, prepayment meters present several challenges:

• Risk of self-disconnection: Running out of credit unexpectedly can cause your energy supply to cut off. This 'self-disconnection' can be very inconvenient, particularly outside friendly hours or when top-up points are closed.
• Daily standing charges: The daily standing charge is still deducted from your meter's balance even if you are not using energy. Failing to top up regularly, especially during low usage periods, can lead to debt accumulation.
• Debt management: While prepayment meters can help prevent new debt, managing existing energy debt can be difficult, as a portion of each top-up may go towards repayment.
• Tariff options: Historically, prepayment meter tariffs were often more expensive than credit meters. Although the 'prepay premium' has largely been removed, making unit rates similar to Direct Debit tariffs, credit meter customers typically still have access to a wider range of cheaper fixed deals.

Managing your prepayment meter

Effective management of a prepayment meter involves understanding how to top up, using emergency features, and knowing where to find help if you are struggling.

Topping up your credit

To maintain your energy supply, you need to top up your meter regularly. Methods differ based on your meter type:

• Traditional meters: These often use a physical key or card for adding credit at a PayPoint or Payzone outlet, or a Post Office.
• Smart prepayment meters: These provide more convenient options, including topping up online, via a mobile app, by text, or over the phone. The credit is then sent directly to your smart meter.

It is important to know your nearest top-up locations and their opening hours, especially before holidays.

Emergency credit and friendly hours

Emergency credit and friendly hours are vital safety nets. Emergency credit provides a temporary supply when your balance is low, while friendly hours prevent your power from cutting out during evenings, weekends, or bank holidays. Remember that any credit used through these features must be repaid with your next top-up.

Dealing with debt on a prepayment meter

If you are struggling with energy debt on a prepayment meter, act quickly. Energy suppliers are legally obliged to work with customers to agree on affordable repayment plans. They can offer options such as payment breaks, reductions, or access to hardship funds.

Citizens Advice offers independent guidance and support for consumers with energy supply issues, including prepayment meters and debt management1. Energy suppliers also have specific obligations towards vulnerable customers, ensuring they receive appropriate support and protection from involuntary meter installations.

Switching from a prepayment meter

Switching from a prepayment meter to a credit meter can offer greater flexibility and access to a wider range of energy tariffs.

Why consider switching?

Switching to a credit meter means you will receive monthly or quarterly bills for the energy you have used, rather than paying upfront. This removes the need for frequent top-ups and the risk of self-disconnection. It also provides access to a broader selection of tariffs, potentially leading to better deals.

The process of upgrading to a smart credit meter

If you have a traditional prepayment meter, your energy supplier is generally required to offer a free upgrade to a smart meter. If you already have a smart prepayment meter, your supplier can often switch it remotely to credit mode without an engineer visit.

To start the change, contact your current energy supplier. They will assess your eligibility, which usually involves checking for outstanding debt and potentially conducting a credit check.

Eligibility and rights

Ofgem, the energy regulator, sets rules for prepayment meters and the switching process. Suppliers must act responsibly and only install prepayment meters as a last resort for debt recovery. If you have cleared your debt and meet the eligibility criteria - such as passing a credit check - your supplier should facilitate the switch to a credit meter.

The benefits of a smart credit meter

Upgrading to a smart credit meter is a significant step towards modern energy management, offering enhanced control and flexibility.

Greater control and flexibility

Smart meters provide automated readings, removing the need for manual submissions. They also offer near real-time data on your energy usage, often shown on an in-home display. This visibility helps you understand and manage your consumption more effectively, giving you greater control over your energy habits.

Access to more tariffs

With a smart credit meter, you gain access to a wider array of energy tariffs, including those with cheaper rates at specific times of the day (time-of-use tariffs). This expanded choice can lead to more competitive deals and potential savings compared to the more limited options typically available with prepayment meters.

Modern energy management

Smart meters form the foundation for modern energy management. They can connect with apps that offer detailed insights into your usage, helping you identify opportunities to save energy and money. This technology future-proofs your home's energy setup, preparing it for a more dynamic and responsive energy system. For more on how smart technology can help, read our guide on energy saving tips.

Your energy future: a power play

Moving from a prepayment meter to a smart credit meter is more than just a change in billing; it is a strategic move that puts you in command of your energy future.

Embracing modern energy solutions

By transitioning to a smart credit meter, you embrace modern energy solutions that challenge the old 'use less' narrative. This shifts the balance of control into your hands. You gain the ability to manage your energy with precision, make informed decisions, and move towards a future where energy is abundant and less of a constant worry.

Finding the right supplier for your smart meter

Once you have a smart credit meter, you are in a much stronger position to compare tariffs from various energy suppliers and find a deal that truly suits your needs. This new flexibility allows you to choose a supplier that aligns with your desire for transparency, control, and a modern energy experience.

Ready to take control of your energy? Switching to Fuse Energy means clear pricing, real-time usage data via our app, and 24/7 human support. Our digital-first approach makes managing your energy simple and transparent. Click here to switch to Fuse Energy today and experience a smarter way to power your home. You can also learn more about our mission to make energy abundant and affordable here.

References

1. Citizens Advice. Grants and benefits to help you pay your energy bills