What is a pre-payment energy meter and how do they work?

Pre-payment meters are electricity and gas meters that work on a pay-as-you-go basis. While they can help you budget, they normally work out more expensive than households with standard meters.

British Gas has now suspended the use of court warrants enabling them to use force when it comes to installation of prepayment meters in households across the UK.

Despite the suspension, ministers will meet British Gas bosses after a “deeply disturbing” investigation revealed how the meters were being forcibly installed in the homes of “vulnerable” customers, with MPs accusing them of a “heavy-handed approach”.

Number 10 called these allegations of contractors reportedly “breaking into” the properties of those struggling with bills as “shocking”.

The Prime Minister’s official spokesman said Energy Minister Graham Stuart would meet with British Gas on Thursday afternoon (February 2) to discuss the reports of debt collectors allegedly breaking into some homes to fit meters despite signs of vulnerable people and children living there.

“It is unacceptable for any supplier to impose forced installations on vulnerable customers struggling to pay their bills before all other options have been exhausted and without carrying out thorough checks to ensure it is safe and practicable to do so,” said an Ofgem spokesperson.

“We have launched a major market-wide review investigating the rapid growth in prepayment-meter installations and potential breaches of licences driving it.

“We are clear that suppliers must work hard to look after their customers at this time, especially those who are vulnerable. The energy crisis is no excuse for unacceptable behaviour towards any customer, particularly those in vulnerable circumstances.”

Here’s what you need to know about the controversial meters.

What are pre-payment energy meters

Prepayment meters are also known as pay-as-you-go meters and they are a common way for a person to pay their energy bills.

A meter is first installed in the home and then a person can top up their credit at a local shop or online, allowing people to buy their energy in units before they use it.

Prepayment meters are more expensive to operate than other types of meters, with cheaper tariffs not always available for prepayment.

What types are there and how do they work? 

There are various types of pre-payment meters. These include key meters, smart-card meters, and coin-operated meters. A key meter uses an electronic key, sometimes referred to as a token, which contains the customer’s tariff information.

Meanwhile, a smart-card meter has a card that sends your latest information through to the supplier when topped up. Coin-operated meters, once commonplace, are quite rare nowadays. As the name suggests, they are topped up with hard currency, such as pound coins.

What are the pros of pre-payment meters?

They can be a useful way of keeping on top of your energy use and managing your household budget. Just like a pay-as-you-go mobile phone, it’s a straightforward way of choosing when and how to spend your money. Pre-paying for your energy lets you pay small amounts often, and it means you’ll never overpay.

Like a standard meter, you can still switch to a cheaper tariff, although there tends to be less choice of providers and tariffs. And, if you want a smart meter, smart pre-payment meters are available.

What are the cons?

Pre-payment meters can be inconvenient if you need to go out to top up keys and smart cards. If you can’t reach a shop to top up, you could run out of credit and your energy will be switched off. What’s more, if you lose your card or key, it can be a hassle getting a temporary one arranged.

According to the consumer help organisation Citizens’ Advice, you should try to avoid having a pre-payment meter if running out of credit and having no gas or electricity would cause you a serious problem. For example, if you have a long-term health condition, disability, medical equipment that wouldn’t work without power, or young children.

Pre-payment meters are also more expensive than standard meters, and there is less tariff choice. The best energy deals on the market aren’t usually available to pre-payment customers.

Note also that pre-payment tariffs have a standing charge (usually 25p – 30p a day), in the same way that credit tariffs do. This charge must be paid regardless of whether you use any gas or electricity on any given day, so you need to have credit on your meter to account for it.

If you owe the cost of the standing charge, it will be deducted next time you top up your meter.

Are pre-payment meters more expensive than standard meters?

Yes, they are. There may be significant savings to be had by switching from a pre-payment meter and tariff to a credit meter, where you pay in arrears by monthly direct debit. However, many of the cheaper deals have been suspended in the current climate, due to the war in Ukraine.

Is it possible to switch pre-payment suppliers?

In general, yes. As long as you don’t owe more than £500 for your gas and £500 for your electricity, you can transfer to a different supplier.

Note that your debt will be transferred to your new supplier and you will still have to pay it off.

Can you swap from a pre-payment to a standard meter?

Many suppliers allow customers to move from a pre-payment meter to a standard meter for free. Others may charge you to change meter, so check first.

To move off pre-pay, suppliers normally require you to have paid any outstanding debt on your energy account, and they will also check your credit score. Bear in mind that, if you are renting, you will need your landlord’s permission before changing the meter.

Could a supplier force you to move to pre-payment?

If you are struggling to pay your energy bill and get into debt with your supplier, or if you are having difficulty paying an agreed repayment plan, your supplier may suggest you have a pre-payment meter installed.

If you refuse this, and if you fail to pay back your debts, a supplier can apply to the court and install a pre-payment meter under a warrant as a last resort.

What if your pre-payment meter is faulty?

According to Citizens’ Advice, if the screen is blank or showing a message such as ‘error’, ‘call help’, or ‘battery’, there’s probably a fault with the meter. Tell your supplier straightaway or you could be left with no energy.

They must send someone out to repair or replace the meter – or fix it remotely - within three hours on a working day, or four hours on a non-working day. If this doesn’t happen, they must pay you £30 compensation.

FAQs

How do you take a pre-payment meter reading?

Meters come in a variety of guises, from ones with dials to the latest digital read-outs. Some may require the user to insert a pre-payment key to get to the desired reading. Suppliers often include information on how to read a particular style of meter on their websites. With digital displays, it’s usually a case of scrolling through the options until you come to the reading you’re interested in.

What if the house you’re moving to has a pre-payment meter?

You should contact the supplier straightaway. Try to avoid accessing the meter with a key or card or adding any money to it. Otherwise, you potentially risk paying extra for the debts of the people who lived in the property before you. Where you need to add money to the meter, tell the supplier. The supplier should take off any debts not run up by you, give you a new pre-payment key or card (depending on the type of meter), and send you information about how the meter works.

What should you do if you lose your pre-payment meter key?

Get in touch with your supplier as soon as possible so they can send you a new one - though this may take several days. The first replacement will probably be free but, after that, expect to be charged, £5 for example. If it’s a top-up card that’s gone missing, it may be possible to pick up a new one from a PayPoint outlet.

Is there a pre-payment meter cap?

Ofgem, the energy regulator, sets a limit on the amount that suppliers can charge certain consumers for a unit of energy. It does this via the Default Tariff cap and it covers two types of consumer: those who are on the default (or standard-variable) tariff of their supplier, and those who use a pre-payment meter to pay for their energy.