Moving to an energy prepayment meter: Everything you need to know
Around four million households are on an energy prepayment meter which supply properties with gas and electricity when they are topped up, with the energy paid for in advance.
They are typically more expensive than standard meters – where you pay for energy after you’ve used it, usually through a direct debit.
If a household is in debt to a supplier, in some instances they can be moved onto a prepayment meter.
The number of households with one is currently on the rise for the first time since 2019. In the six months from October 2021, 60,000 were installed, according to Uswitch analysis.
Based on the current rate, it could mean an extra 10,000 meters being converted from standard to prepayment each month till the end of the year. And if this trend continues, the figure could rise to 100,000 in just 12 months.
But providers aren’t automatically allowed to change a household’s meter and there are certain rules they need to follow. Here we look at exactly how it works.
What is a prepayment meter?
The difference with a prepayment meter is that energy is paid for in advance. Energy used through a standard meter is paid for after it has been used.
There are old-style prepayment meters, which need to be installed, or if you have a smart meter it can be switched to ‘prepayment’ mode.
How do you top it up?
Traditionally prepayment meters are topped up with a card at a local shop, such as a newsagent. You can now also top up online.
When could you move to a prepayment meter?
Providers must follow rules set out by regulator Ofgem and the government when moving someone to a prepayment meter.
If the household is in debt to a supplier, or you’ve told a provider you’re going to have difficulty paying a bill, you must be given options. These include a payment plan, paying the debt off in installments, paying through benefits, or using a prepayment meter.
The energy provider also needs to give the billpayer options and advice about how to use less energy. You can’t have your energy supply cut off unless a supplier has tried to find a way to settle the debt.
You should be given at least 28 days to repay an energy debt and after that period, your supplier will need to contact you again to say they’re going to change your meter. You then need to be given seven days’ notice before someone comes to install a gas meter, and seven working days for an electricity meter.
If you’re disputing the money owed, you can’t be moved, but if you don’t repay any money due, and refuse to have a prepayment meter, your energy supply could be cut off.
Suppliers also need to give the billpayer a guide which explains details such as how prepayment works, the advantages and disadvantages, what happens if the meter runs out of credit, and what will happen if the meter is replaced with a standard meter.
What are the regulator, Ofgem’s rules?
Energy suppliers have to follow rules which are set out by Ofgem. They say that you can’t be moved to a prepayment meter if:
- You don’t agree that you owe your supplier money, and you’ve told it
- You haven’t been offered other ways to pay such as a repayment plan or paying through your benefits
- You haven’t been given at least seven days notice for gas and seven working days notice for an electricity prepayment meter to be installed.
- You haven’t been given at least 28 days to repay the debt before writing to you to say you will be moved to a prepayment meter.
If any of these scenarios apply, contact your provider and tell it. If it goes ahead and says it still wants you to move to a prepayment meter, Citizens Advice says you should complain directly to the company.
Can you refuse to be moved?
Energy suppliers aren’t allowed to change households to prepayment meters if it wouldn’t be safe or practical to do so.
If, for example, you have an illness or a disability and would be harmed if your energy was cut off, you can refuse to have one installed. This could be because you are disabled in a way that makes it hard to reach the meter, you have an illness that affects your breathing such as asthma or you use medical equipment that needs electricity.
You can also be added to your supplier’s priority services register, and you may get extra help with your energy costs. If you can’t reach or access the meter, you can also refuse to have it installed.
However, you could pay more if you refuse to have a prepayment meter without a reason. If you don’t have a valid reason, a supplier is allowed to move you to a prepayment meter.
They can then get a warrant to enter your home and install the meter, or change your smart meter to the prepayment setting. They may charge you up to £150 for doing this, according to Citizens Advice.
What are the costs to households?
You should not be charged for having a prepayment meter installed. The only exception is where a warrant is issued (as above).
If an energy supplier tries to charge you, Citizens Advice says you should tell it you will switch to a different supplier that will install it for free.
What happens if you are a tenant?
The same rules apply to renters, if your supplier wants to install a prepayment meter, your landlord can’t stop them.
You also have the right to switch suppliers, even if you have a prepayment meter.
How much more will you pay for energy with a prepayment meter?
The cost of energy supplied through a prepayment meter is greater than the cost through a standard meter. Prepayment meters are covered by the Energy Price guarantee, which caps average bills at £2,500 but this is set to change after April.
Those on prepayment meters are predicted to spend £258 more on their energy bills this winter, compared to someone with a standard meter paying via direct debit, according to data from Citizens Advice. Collectively, they will spend more than £1bn on energy when compared to direct debit customers.
How do the standing charges differ?
The cost of energy through a prepayment meter is usually more expensive. There are also standing charges that need to be paid. These are daily fees you pay just for having the meter.
You pay these with a standard meter too but you need credit on a prepayment meter to pay the fees. Therefore if someone hasn’t topped up their prepayment meter, these fees will build up and are often eaten up when they top up the meter.
It costs around £50 a year more for a prepayment meter in standing charges when compared to a standard meter, according to Uswitch data.
What is self-disconnection?
Self-disconnection is when a person chooses not to top up their meter, because they can’t afford to buy more energy. Effectively, it means having the energy supply cut off.
Many consumer groups and charities have warned that people will be self-disconnecting this winter because of the energy crisis.
The problem, and main criticism here is that even though people aren’t actively topping up, paying or using energy, they continue to rack up daily standing charges.
This means when someone does eventually come to top up their energy, the credit is often eaten up paying off these existing debts on the meter.
Do energy suppliers have a duty of care?
Energy suppliers have a duty of care when it comes to cutting off a person’s energy supply. They need to follow strict rules, as outlined above, but they also need to be aware of self-disconnection.
New rules were introduced in 2020 for prepayment customers who either self disconnect, self limit their energy supply or have problems paying their bills.
Suppliers must identify these customers and support them through emergency credit. Vulnerable customers also need to be offered additional support credit.
However, despite these rules, nearly all energy suppliers were recently warned by Ofgem to make improvements to the way they help customers who have payment difficulties.