Pre-payment meters - all you need to know
There are about six million pre-payment meters in households across the UK and they work rather like a pay-as-you-go mobile phone.
In other words, you pay for your energy up front instead of by quarterly bill or monthly direct debit. And if there is no credit in the meter, there is no energy supply to the home.
Customers in debt
Pre-payment meters are usually installed when someone has slipped into debt with the energy supplier, so the customer ends up paying for any arrears as well as their current consumption. Landlords also often fit pre-payment meters in their rental properties to minimise the risk of tenant default.
A pre-payment meter can help you to budget for your energy bills, but it can also be one of the most expensive ways to pay for gas and electricity.
Types of pre-payment meter
There are three different types of pre-payment meter. Machines that take cash or tokens are increasingly rare these days. If you have a pre-payment meter in your home, you will more than likely top it up with either a key or a smart card.
Charging your meter
Some smart cards allow you to top up with credit online, but you usually load your key or card with credit at the Post Office or a PayPoint or Payzone shop. Your energy supplier should give you a list and it's a good idea to note down the nearest shops and their opening hours in case you need to charge your meter in a hurry.
Keep an eye on the credit in your meter so that you don't unexpectedly run out of energy. Your meter might come with an emergency reserve to tide you over. But it might not last long - and you will have to pay it back next time you top up the meter.
Going on holiday
You should always make sure there is enough credit in your meter if you are going on holiday so that your energy supply isn't shut down in your absence. After all, you don't want to come home to discover that the freezer has switched off and the food been spoiled.
It's important to keep your key or smart card safe. If it is lost or damaged you should contact your supplier immediately. You might be able to pick up a temporary replacement at your local charge point while you wait for a new one to arrive, but the company will probably want paying for any replacements.
Pre-payment customers often pay more for each unit of energy than standard customers. Plus, they don't normally have access to the best deals. However, different energy companies charge different rates to their pre-payment customers, so you could save money by shopping around and switching to a cheaper tariff.
Changing to a standard 'arrears' meter
If you want to switch back to a standard meter, where you pay in arrears rather than in advance, you will usually have to clear any arrears and satisfy certain conditions. The energy supplier might also charge to replace the pre-payment meter with a standard device.
Some people inherit a pre-payment meter when they move to a new home. If so, you should register with the supplier as the new owner or you could end up paying off someone else's debt.
You could also ask the company to remove the pre-payment meter and put you on a standard deal, though again, there could be a charge.
Pros and cons
Pre-payment meters allow you to carefully control the amount you spend on energy. Customers with pre-payment meters are also spared any bill shocks.
However, the disadvantages of pre-payment meters almost always outweigh the advantages. The big downside is the price of the energy. Plus, you cannot spread the cost over the year so you will almost certainly have to pay more during the winter months.
You should also bear in mind that it's not always convenient or possible to top up your meter, threatening the energy supply to your home.
You might have to pay more for your energy with a pre-payment meter but the supplier should treat you fairly. For example, they should check whether you are vulnerable before they install a pre-payment meter and extend the emergency credit if you run out overnight or over Christmas and New Year.
If you don't think your supplier has treated your fairly, you are within your rights to make a complaint.