Updated Thursday, March 10, 2016

If you’re on a prepayment meter you could be in line for a cut of up to £90 a year on the cost of your energy bills.

The Competition and Markets Authority (CMA) has released its long-awaited report on the state of the energy industry and has recommended a cap on pre-payment tariffs between 2017 and 2020, saving pre-payment customers around £300 million on their energy bills.

The current prepayment system will then be phased out as each home will have a Smart Meter installed by 2020.

What is a prepayment meter?

A prepayment meter is a type of domestic energy meter that uses a ‘pay-as-you-go’ tariff and requires consumers to pay for their gas and electricity in advance. With a credit meter, you pay for energy used in the preceding month or quarter.

Energy is usually paid for by adding funds to a special key fob or smart card that is then inserted in to the meter.

Prepayment meters are usually used by lower income households or those that don’t pass the credit check needed to pay for energy quarterly or monthly.

Customers who are in arrears on a credit meter might be moved to a prepayment meter, at least while they pay off their debt.

Why switch from a prepayment meter?

It’s possible to switch from one prepayment meter to another if you find a better tariff.

But it’s still the case that the best deals and most competitive tariffs go to those customers on credit meters who pay for their energy monthly or quarterly, usually by Direct Debit.

The good news if you’re on a prepayment meter is you can change it for a credit meter, switch to a cheaper tariff and instantly make savings on your energy bills.

The bad news is, unlike when you just switch supplier, switching from prepayment to credit means a new meter to be physically installed in your home, and installation times can vary.

Although switching provider takes just 17 days, switching meters can take longer so you may have to wait before the savings really kick in.

There could also be a fee involved to cover the cost of the new meter and its installation.

If you’re in debt with your current energy supplier you can still make the switch provided you owe no more than £500, and you’ll have to arrange a payment plan to get this debt settled.

So what exactly is involved in the switching process?

How to switch from a prepayment to a credit meter

The first thing to do is contact your energy supplier to find out whether you’ll be eligible for a credit meter.

This will typically involve them running a credit check on you, the results of which will help them decide whether or not they think you’ll be able to keep up with repayments.

If you pass the credit check an engineer will be sent round to remove your current meter and install the new one, which could anywhere between a couple of days and a couple of weeks depending upon your supplier.

And even though you may be charged a fee to cover the cost of the installation, you might be able offset by the savings you will make by signing up for a cheaper tariff.

As each of the Big Six energy suppliers has its own rules around the replacement of prepayment meters, let’s take a look at what’s involved…

British Gas

Any decision will be subject to a credit check and British Gas will take away your prepayment meter and replace it with a credit meter for nothing provided that you have no outstanding debts with them or if you have moved into a new property where a prepayment meter is already installed.

EDF Energy

EDF Energy will also remove a previously installed prepayment meter and fit a credit meter free of charge, and the process can take up to a couple of weeks depending upon where you live and the lead times set by the meter installers.

One stipulation is that you have been an EDF Energy customer for at least 28 days to ensure the all of your energy usage information is accurate when your account is set up.

EDF Energy will only refuse to change the prepayment meter if it has been installed because you are significantly in debt, which means by over £500.

E.ON

E.ON will exchange your prepayment meter provided that it has not been fitted to recover debt and on the condition that future bills are paid by direct debit.

E.ON also stipulates that you must have lived at the property for at least three months and may also charge a fee for installation of the new meter.

You may also be charged a fee to cover any credit checks that are taken out against you.

Npower

Npower will replace your current meter with a credit meter free of charge if you moved into a property that already had a prepayment meter installed. This will be subject to you passing a credit check and you may also be asked to enter a payment plan to help you with your budgeting.

If you have been an Npower customer for less than 12 months Npower may charge you for the removal of your old meter and may also refuse to change your meter if you are still significantly in debt and owe more than £500 in unpaid energy bills.

Scottish Power

Scottish Power will change your meter provided that you have been a customer for 12 months and that you are prepared to pay your bills by direct debit and you may also be required to pay a cash deposit that will be refunded to you should you successfully meet all of your payments over the course of the first year.

You may also be charged a fee to have the prepayment meter removed.

SSE

SSE will replace your prepayment meter with a credit meter provided that you successfully pass a credit check and that you are prepared to pay future bills by direct debit.

You will also be charged £52 per meter, this is to reflect the costs that SSE incur for removal and installation, and once the credit check has been passed and the fee paid, you should have your new meter installed within 10 working days.

Switch and save

If you feel it won’t be cost effective to switch meters, or you just don’t have the money available to pay for your current prepayment meter to be replaced, it may be a good idea to switch to a provider that will install a new meter free of charge.

Then, once you have been with your new provider long enough you can change to a credit meter free of charge - EDF energy, for instance, will switch meters once you’ve been a customer for 28 days.

And with the new meter installed you can continue to make savings on your energy bills by switching to one of the more competitively priced tariffs on the market.

Originally published Thursday, September 27, 2012

Follow Les on Twitter @LesRobertsMSM

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