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Prepayment meters: Part 1 – Introduction

Sunday, November 23, 2014

Welcome to the first in our series of posts about prepayment meters.  Why are we doing more than one of our Know-How guides?  The reason being, there is a lot to discuss!

What is a prepayment meter?

Prepayment meters are relatively common in the UK, 5.8 million households have one. In many ways they are similar to any other gas or electricity meter: they measure how much energy a household has used.  The fundamental difference is unlike a post-pay meter (where you receive a bill after every quarter or month), you have to pre-pay for your electricity in advance by purchasing credit which is loaded on to a meter ‘key’, card, or some cases money directly into the meter.

Prepayment meters are very similar to pay-as-you go phones you pre-load them with credit.  But, the problem with a prepayment meter is when the credit runs out, EVERYTHING switches off.  Sometimes this could be a mild inconvenience, other times, like in the middle of the night and all the lights go out, it could be highly disruptive.

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To alleviate this problem suppliers have introduced ‘friendly emergency credit’, typically £5.  This is activated when your credit runs below 50p between 6pm and 9am (or 7pm and 10am during British Summer Time).  9am the next morning, the meter will cut off and you will need to top your meter with new credit, and also pay back the emergency credit used.

If a prepayment meter is inconvenient, why install them?

Usually prepayment meters are installed by suppliers in households where there has been a history of being in debt to the supplier.  By making tenants pay up front for the energy they use, the risk of non-payment to a supplier is reduced.

Some landlords may have a prepayment meters installed in their properties so that tenants can not build up debts. Some tenancy agreements may even state that the meter can not be switched to a standard credit meter.

So, you can’t build up debt on a prepayment meter?

You can in fact! Having lived in property that used to have a prepayment meter I know this first hand, and I was shocked too.  The meter charges you for the amount of energy units you use multiplied by the unit cost (the price of electricity or gas), plus a daily charge.  When a supplier changes their prices, the unit price used by your meter might be different.  When your supplier requests a periodic meter reading you may find that a debt has been inadvertently built up, because the meter does not know the new unit prices.  To check the unit prices used by your meter, and those of your tariff, refer to your supplier provided user guide or contact your current supplier.  It is best to check they match to prevent future bill shock.

How much more expensive is a prepayment meter?

As ever, this is not the simplest of questions to answer; it all depends on which tariffs you are comparing it against.  The graph below compares the prepayment electricity tariff charges for the ‘Big Six Suppliers’ with their cheapest available tariff (prices quoted at time of writing 17/11/14 and for the post code CW9). We have used the tariff comparison rate (TCR), an explanation of the TCR is given at the end of this post, along with the data and information about the tariffs used to construct the graph.

Prepayment meters cost comparison

In some cases there is large difference between the prepayment and the cheapest tariffs with E.ON being 37% more expensive.  British Gas has the smallest difference between their cheapest tariff and prepayment meters, but still 7% more expensive.

What next?

This post has been prepayment 101. The next in the series will deal with what we can do about them.  Do you have a prepayment meter installed? If so, how do you find them?  Share your stories on the Forum to help others.

Part 2 of the series on prepayment meters can be found here. In part 2 we discuss why prepayment meters are more expensive and whether you can switch to a credit meter.

Data

Prepayment tariff (per kWh) Cheapest (per kWh) % more expensive than cheapest tariff
British Gas 17.62p 16.46p (Electricity Fix & Fall March 2016 – Dual fuel) 7.05
npower 18.20p 15.08p (Online Price Fix Jan 2016) 20.69
EDF 17.80p 15.85p (Blue+Price Promise March 2016) 12.30
SSE 18.73p 15.26p (12 month Price Fix – Dual Fuel) 22.74
E.ON 18.85p 13.73p (E.ON Energy Fixed 1 Year v12) 37.29
Scottish Power 18.64p 14.46p (Online Fixed Price Energy January 2016) 28.91

Tariff Comparison Rate

Tariff comparison rates (TCRs) were introduced by Ofgem on the 31st March 2014 to help people compare between tariffs.  We discussed TCRs in a previous blog post. The TCR factors in not only the unit price of the electricity (or gas), but also the standing charges of the tariff and any discounts.  The TCR is always calculated using a medium energy usage profile (3200 kWh of electricity and 13,500 kWhs of gas).  The TCR only offers an indicative comparison between tariffs.

  • Andrew Timmis
  • Posted by
    Andrew Timmis
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