UK Prepayment Meters: the Good, the Bad, and the Ugly

It has been estimated that there are some 6 million households in the UK paying for the gas electric using a prepayment meter. A prepayment meter is one in which the customer pays for utility usage as he or she goes, topping up the meter with a key, a credit card, or utility card. If the customer uses all of the credit on their account, and fails to top up, the utilities could be cut off.

There are a number of reasons why prepayment meters are installed but more on that in a minute. Suffice it to say that paying for utilities in this way is more than just a bit inconvenient. It can also cost you more than a contract meter if you do not pay attention to pricing and hold your utility provider's feet to the fire.

UK Prepayment Meters: the Good, the Bad, and the Ugly

The Prepayment Meter Explained

The prepayment meter is to household utilities what the prepaid mobile phone is to mobile communications. There are no contracts involved and it is nearly impossible to use energy you haven't already paid for. The whole idea of this type of meter is to make sure utilities are paid for upfront.

When a prepayment meter is installed, customers have several methods to keep it topped up and keep the power flowing. It is up to the individual customer to monitor the meter to make sure the balance doesn't run to zero. According to the Energy Shop, the three primary types of prepayment meters are:

  • Smartcard Meters - A smartcard meter is the prepayment meter equivalent of a contract smart meter whereby everything is done wirelessly. Rather than topping up the card at a store, the user does so online. The power company then communicates with the meter remotely and adds the appropriate credit to it.
  • Token Meters - The token meter utilizes a card that resembles a standard credit or debit card. The card is topped up at a store or the Post Office and then inserted into the meter in order to transfer the credits. PayPoint outlets are one of the more popular options for topping up token cards.
  • Key Meters - The key meter works pretty much the same as the token meter except that the card is replaced with a small electronic key that looks similar to a flash drive. The keys are topped up at retail locations that are part of the utility company's network. The key is then inserted into the meter to transfer credit or to activate the meter's emergency credit.

One of the main criticisms of the prepayment meter system is the fact that power companies can support just one type of meter or all three. Consumers have no way of knowing without specifically contacting the power company and asking.

This is important in terms of switching to new providers. For example, if your current meter uses a key, you will probably be able to switch over to a new provider also using a key system without any hassle. However, if your new provider only supports one the other two types of meters then you will have to have yours switched out. In all likelihood, you will have to pay for that switch.

Reasons for Installing a Prepayment Meter

Because prepayment meters are inconvenient, you might be wondering who would install one. There are several different answers to that question, beginning with power companies themselves.

If a customer falls behind on his or her utility bills, the power company might consider putting in a prepayment meter in order to prevent the debt from becoming too large. The meter is a way to ensure the company gets paid going forward while at the same time the customer learns to better manage his or her finances.

When the power company does install a prepayment meter, they usually make it possible to switch back to a contract meter once certain conditions are met. Although there are no hard and fast rules about what those conditions are, they would generally include paying off your outstanding balance in full and maintaining good credit for three months or longer.

Another group of people known to install prepayment meters are landlords. When they do so, it is typically to protect their own finances against tenants that would rack up debt with the energy company. A landlord does not want to assume that liability so he or she may solve the problem by installing prepayment meters for all units.

Lastly, individual consumers sometimes install prepayment meters for reasons pertaining to their budgets. For some there is great comfort in knowing that they will never rack up debt with their power supplier because they have the prepayment meter. The pay-as-you-go system is the only way to go for some people.

Switching Back to Contract

As previously stated, it is sometimes possible to switch back to a contract meter if your energy supplier installs the prepayment meter because you are in debt. However, remember that it will probably take some convincing to get that done. Power companies do not install prepayment meters on a whim; they do so as a last resort when customer debt looks like it is going to spiral out of control.

If you want to switch back, the first step is to contact your energy supplier and let them know what you want. Upfront they should tell you whether or not it is possible and, if so, what needs to be done to accomplish it. Understand that some power companies will charge you for replacing the meter while others will not. If your energy company resists, be persistent until they switch you.

If your landlord installed a prepayment meter, you probably will not have a say in the matter. You can always ask, but the property owner has the right to determine what types of meters he or she is going to use.

Prepayment Meters More Expensive

When you purchase your gas and electricity through a prepayment meter, you are likely spending more than you would with a contract meter. Estimates provided by the Guardian in 2009 suggested as much as £215 more per year. Utility prices have been up-and-down since but the average is likely about the same.

It has been claimed by some that power companies charge more to customers using prepayment meters because such meters cost them more money to install and maintain. That may be true to some small degree, but it is not the main reason why prepayment customers pay more. The primary reason has to do with the types of customers using these meters.

Although there are exceptions to the rule, prepayment customers tend to be those with questionable financial histories. Their past performance in terms of managing their finances makes them or risk to the power company. And since power companies are compelled by law to provide utilities to every customer, they must charge higher rates on prepayment meters to cover any losses that might result from the customer defaulting on his or her past debt.

If you compare the prepayment meter to a high interest credit card or an insurance policy for someone who has a lot of accidents or violations, you can see the principles are very similar. The more financially irresponsible the customer, the more the power company stands to lose. They charge higher rates as a result.

Things You May Not Know

Before we wrap this up, there are couple of other things you need to know about prepayment meters. These things are general rules but there are exceptions with some power companies. You will have to check with your provider to find out which of these things apply to them.

  • Emergency Credit - Prepayment meters typically come with an emergency credit somewhere in the neighbourhood of £5. That emergency credit can be utilised by the customer if the meter is close to zero and he or she is unable to top up right away. If the meter runs out in the middle of the night, emergency credit will kick in automatically; it will have to be reactivated in the morning to keep the power on until the meter is topped up.
  • Energy Tariffs - Those on a prepayment meters are also assigned to the prepayment tariffs. Unfortunately, the cheapest tariff options are not available to prepayment customers. That is one of the reasons why it is advantageous to get back to a contract meter if at all possible.
  • Amounts Past Due - Customers forced into a prepayment meter because of outstanding debt are still responsible for past due amounts. Every time you top up your meter, you will be paying a little bit off until your debt reaches zero. In one sense, this makes the prepayment meter good in that it forces delinquent customers to make good on their debt.
  • Previous Occupants - If you move into a home in which a prepayment meter was installed because of the previous occupants, you need to contact the power company and explain you are new occupants. In some cases, they will be willing to change the meter for you. If they are not, they at least need to give you a rate based on your own circumstances rather than those of the previous occupants.

Conclusion

Whether you are already on a prepayment meter or considering making the switch to one, understand that you do not have to just blindly accept the price offered to you by the utility company. Prepayment customers can shop around like anyone else. You owe it to yourself to do as much.

You can shop around by contacting utility companies individually and inquiring about the types of meters and their prices. Alternatively, you can shop using a comparison website. In either case, you will not get the best price if you don't go looking. It only takes a short amount of time in relation to the amount of money you could save, so do not put it off.

To help you better understand prepayment meters and what they offer, we have included links to some of the UK's most prominent power providers below. On these pages, you will see how prepayment meters for each of these companies works. This will give you an idea of some of your options.

Southern Electric - Here you will find out about the prepayment meters offered by Southern Electric. This page explains what they are, how they work, how to top up a meter, and what to do in the event of an emergency or a faulty meter.

British Gas - On this site, British Gas offers their guide to prepayment meters. From here, you can also follow links to other parts of their website to learn about energy efficiency, tariffs, and more.

E.ON - By following this link, you will learn all about both gas and electric prepayment meters from E.ON. Their information includes an explanation of prepayment meters, an FAQ section, a quick guide to topping up your meter, and a comparison of the pros and cons of prepayment for utilities.

When you shop for prepayment prices using a comparison website, you are able to get information from multiple providers by submitting a single online form. If you are looking for the fastest and most efficient way to compare energy prices for prepayment meters, these are the sites to begin with.

Go Compare - Compare prices on gas, electric, or dual fuel here. When you fill out the online form, you will need to indicate you are looking for prices on prepayment meters.

Money Supermarket - This site has a dedicated page for prepayment meters. They answer some of the more basic questions and offer a link for an online quote. They claim 20% of their users save as much as £200 on their energy bills.

Confused.com -Another site where you can compare prices for dual fuel, gas only, or electric only. If you make the switch online this site says you could save £320 or more. You will have to designate that you are looking for prices for prepayment meters.

Compare the Market - This site works with some of the industry's biggest names to offer you price quotes on gas, electric, and dual fuel. Just answer a few questions about your energy consumption, where you live, and how you pay.

Tesco Compare - Tesco Compare partners with the Energy Shop to provide gas, electric, and dual fuel quotes from all of the major power companies. Their online form makes it easy to get side-by-side comparisons based on your location and method of payment.

uSwitch.com - Your search for energy prices on the site begins with answering two simple questions. In addition to comparisons, the site also offers several excellent guides explaining how the energy industry works for you.

Money.co.uk - Here you will not see direct quotes for prepayment meter prices, but you will see general price comparisons among the major energy suppliers. This will give you a good idea of what to expect in terms of prepayment prices.

Totally Money - This site guarantees to find you the cheapest energy prices anywhere. It starts by asking for your postcode and the type of energy you want to compare. Once you begin the quote process, you will designate the fact that you are looking at prepayment options.

Money Saving Expert - Information about how you can actually save money by going with a prepayment meter is hard to come by. This site explains how that is possible. They offer a number of other guides having to do with other home energy topics as well.