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5 August 2020
Prepaid energy prices are capped by the regulator, but don't be fooled, there are cheaper prepayment deals for switchers that can help you save – and most can save £190+/year. To check, do a Cheap Energy Club comparison.
Prepayment meters are electricity and gas meters that let you pay for your energy on a pay-as-you-go basis. About four million UK homes have them and you top up prepayment meters via a key or card, which you can buy credit for at newsagents, post offices and garages, or via an app or online. While they can help to budget, you usually end up paying more for energy.
In general, prepay customers have access to fewer tariffs, typically pay more for their energy, and are more likely to be in vulnerable circumstances than those paying by other means.
The only advantage of sticking with prepay is if you have problems budgeting.
In April 2017, Ofgem introduced a cap on most prepayment tariffs, limiting what suppliers can charge for gas and electricity. Prices are currently capped at £1,164/year on average for someone on typical use, but Ofgem has now announced the cap will fall by £95/yr to a typical £1,070/yr from 1 October 2020.
But don't be fooled, the real savings are still to be made by switching.
As part of its investigation into the energy market back in 2016, the Competition and Markets Authority (CMA) found that prepayment customers were getting a particularly raw deal.
Whereas those on standard meters are able to make hefty savings by switching energy provider, there are fewer tariffs available to prepayment customers, and the tariffs that are available are generally more expensive.
Customers with prepayment meters are also more likely to be in vulnerable situations than those paying by other means.
A price cap on prepayment tariffs was put forward as a remedy to this by the CMA, and in February 2017 Ofgem introduced a cap.
It has since changed from the initial level set back in 2017 multiple times, as Ofgem updates the maximum charges allowed under the cap every April and October, based mainly on wholesale costs (what suppliers pay for gas and electricity) over a six-month period leading up to the energy regulator's review.
The cap will remain in place until at least the end of 2020, although the Government has the option to extend it on an annual basis until 2023 at the latest.
Ofgem is now recommending that the cap is extended until at least the end of 2021 for both standard and prepayment tariffs, with the Secretary of State for Business, Energy and Industrial Strategy to make the final decision on any extension.
Can I use as much energy as I like and pay £1,164/yr?
No, unfortunately it's not that simple, as the price cap varies with your usage and where you live.
The current £1,164/yr figure is based on a particular level of usage – what Ofgem deems a 'typical' user – for gas and electricity, averaged across all regions.
The price cap simply sets a maximum charge for each unit of gas and electricity you use – so if you use more, you pay more – and a maximum daily standing charge (what you pay to have your home connected to the grid).
The price cap also varies by region. With typical use, the cap varies by about £70/yr between the most expensive and cheapest regions.
Are all price capped?
No. If you have a smart prepayment meter, or your prepayment tariff is fixed, your prices aren't capped.
The very cheapest energy tariffs are for those who have standard meters – where you pay monthly or quarterly, by direct debit, cash or cheque.
For a typical household, you'd save about £185/yr on the cheapest deal with a standard meter, compared to the cheapest prepayment deal.
|Prepay energy price cap on typical use
|Cheapest prepayment deal
||Bulb – Vari-Fair Prepay||£973|
|Cheapest standard meter deal
||Outfox the Market variable (2)||£788|
|Tariffs correct as of 7 August 2020. Based on calculations from Ofgem for medium usage. (1) Including £25 MSE dual-fuel cashback. (2) Warning: Its customer service record has been poor recently, so think carefully before switching to it.
One of the main reasons prepayment meter are more expensive than standard credit meters is simply that they are more effort for the suppliers. Providers prefer to get regular, automatic payments for your energy, which is what you get with direct debit payments on standard credit meters. This is why it's the cheapest way of getting your energy.
Standard meters also offer a wider choice of tariffs and suppliers, including cheap online deals, direct debit discounts and more. It's simply a more competitive marketplace.
Choices are opening up for prepay users, but it's still an outrage that some of society's poorest often pay more for their energy with these meters. So if you can, ditch and switch to a standard credit meter – usually this involves a credit check and ensuring you've repaid any debt owed to the supplier.
Update: With lockdown restrictions being eased, suppliers are gradually starting to offer engineer appointments to replace meters again.
All big six energy suppliers – British Gas, E.on, EDF, Npower, Scottish Power and SSE – will let you move from a prepayment meter to a standard meter for free. Some other suppliers also offer to do it for free, though smaller providers will charge you to change meter, so always check first and if that's you, considering switching away to a provider that will give you a meter for free.
To move off prepay, nearly all suppliers require you to have paid any outstanding debt on your energy account and be credit scored, so they can see if there's a risk you won't repay. Of the big six, only EDF says it won't credit check you, though it does require you to pay off any debt first.
|British Gas||You'll need to pass a credit check and can't be in debt with any energy supplier.
|E.on||You need to pass a credit check.
||There's no credit check, but you'll need to clear any outstanding debt.||No|
|Npower||Existing customers need six to nine months' good payment history and can't be in debt. New customers will be credit checked and, if failed, may be asked for a £250 deposit per fuel or to demonstrate a 12-month period of good repayments.||Yes|
|Scottish Power||Pass a credit check and have an account review. If you fail the check, it may ask for a £150 deposit per fuel, which will be returned after a 12-month period of good repayments.||Yes|
|SSE||You can't have any outstanding debt and must pass a credit check. SSE may also ask for a security deposit.
|Correct at 22 October 2019.|
If your provider allows you to switch to a billed meter, suddenly a world of competition and cheap prices is available to you that wasn't before.
The cheapest prepaid tariff is £185/yr more expensive than the cheapest billed tariff on the same usage, so here are the two things you need to know once you've a billed meter:
For more info and top tips on getting the best out of your new standard credit meter, see Cheap Gas & Electricity.
The provider may charge you for the free meter if you switch away to a different supplier before 12 months have passed, so it can recoup its costs.
It can't dictate which tariff you opt for though, and almost all suppliers have much cheaper deals available than their standard tariff. To find your provider's cheapest, you can use our 'my current supplier' comparison filter in Cheap Energy Club.
Prepayment meters do have one advantage – they help you budget. You know what you're spending, when you're spending it, and it's an incentive to keep energy usage down.
While for most the savings from lower rates will outweigh this, it's worth thinking about before deciding to move to a standard credit meter.
If you've tried everything to get a free standard credit meter and can't, it still may be worth paying, though it's NOT worth getting into debt for.
The cheapest prepayment meter tariff costs, on average, a typical £963/yr including MSE cashback. Yet the cheapest tariff for standard credit meter customers is currently £787/yr, a saving of £170+/yr. Balance the saving with the cost of swapping meters to help you decide.
As a rule of thumb, if you'll live at your property over two years and you're not struggling financially, it can be worth paying for a standard credit meter.
If you haven't been able to get a standard credit meter for free and fit into either of these groups, it may still be possible to swap.
Get certain benefits? A Government scheme, Fuel Direct, lets you pay your bills directly from your benefit allowance. To be eligible for the scheme you have to receive certain benefits.
Energy suppliers may agree to remove a prepay meter if you agree to sign up to Fuel Direct. None have confirmed this and they say it's decided on a case-by-case basis, but it's worth a try.
Medical condition? According to charity Citizens Advice, if you have mobility problems or are reliant on electricity for medical reasons, eg, to run breathing apparatus, you may be able to get your prepay meter removed.
With most providers, the key is ensuring you're free of energy debt. After that, you need to make your credit score look as good as possible – see the 37 ways to boost your credit score guide for more help.
If you want to change from a prepay to a standard meter, then it's best to get written permission from your landlord first. It could be seen as changing the property from its original condition, unless you arrange to change the meter back at the end of the tenancy, which suppliers may charge you for.
You should check your tenancy agreement to see what it says about switching energy suppliers. But even if your contract bans it, Ofgem's guidance states that if you pay the energy bill, you're still entitled to change supplier (check your tenancy agreement, too – if it says you can't switch, challenge it).
You don't need to get permission from your landlord to do this, but it's a good idea to let them know so they're aware, as it will impact future tenants.
To see if you can save, do a comparison on Cheap Energy Club. What's more, it'll help you estimate usage for your new home.
Even if you pay energy bills to the supplier, but your tenancy agreement says you can't switch, challenge it. Preventing a tenant from changing energy suppliers may be viewed as an unfair term in a tenancy agreement. Speak to Citizens Advice to see if it can help.
If there's a default supplier clause in the tenancy agreement – where a landlord has a tie-in with a particular supplier – Ofgem says you can still switch.
Ofgem's guidance states: "If a tenant is directly responsible for paying the gas and/or electricity bills, they have the right to choose their own energy supplier and the landlord or letting agent should not unreasonably prevent this." See the Ofgem website for more.
If your landlord won't budge, and you don't want the hassle of challenging it, ask if you can be switched to a cheaper tariff with the same energy supplier. If the landlord allows this (here's hoping they will), you'll start paying the cheaper prices the same day you switch.
Tenants can also print out our factsheet to give to landlords. It explains the rights that renters have to switch energy supplier.
Tenants can also get free insulation and boilers, as long as they meet suppliers' eligibility criteria and have permission from their landlord.
You may be able to qualify if:
Update: If you're self-isolating, you may want to consider carefully before you switch, as you can't transfer credit from one supplier to another.
Don't just give up – you can still switch your energy and save massively on bills. While there are fewer deals available if you're stuck on prepayment, someone on a typical big six standard prepayment tariff can save over £190/yr by switching to the cheapest prepay deal.
|Prepay energy price cap on typical use
|Cheapest prepay deal (variable)
||Bulb Vari-Fair Prepay||£973
|Cheapest prepay fix||EDF Prepay Total Service Nov21||£1,091|
|Correct as of 7 August 2020. All tariffs assume national Ofgem medium usage. Varies by region. (1) Includes £25 MSE dual-fuel cashback (where applicable).|
You can switch and save on prepaid gas or electric meters. Our Cheap Energy Club tool makes switching as easy as possible and helps you get constantly cheap gas and electricity.
All you need to do is tell it where you live and how much energy you use. Then we'll tell you if you're overpaying on your current deal or if there's a cheaper alternative.
But the best bit is we'll keep monitoring your tariff for you every month to ensure you're always on the best deal. Plus, if we can switch you, you'll usually get £25 cashback.
It's also possible to get cashback for switching from comparison sites. Though bear in mind that some comparison sites by default only show you tariffs you can switch to via them (ie, where they're paid commission). This filters out some results – Cheap Energy Club shows you ALL those available by default.
If you do use a comparison site, always check you're seeing all available tariffs to get the full picture before making a decision.
Energyhelpline* has a history of good reliability and good feedback on our forum. It pays £17 cashback per fuel, per switch if you do it online.
Alternative comparison site. £40 wine.
uSwitch* promises six bottles of wine (worth c. £40) for a dual-fuel switch, ie, switching both gas and electricity to one provider. Though always check whether getting separate gas and electricity can undercut it, as it sometimes can.
By clicking via these special MoneySavingExpert.com links specifically to get to the comparison sites and not going direct, you also get paid the cashback or freebies on top, provided they can switch you.
Switching is easy, it's the same gas, same electricity and same safety – the main things that change are price and customer service. You'll be sent a new key or card to top up with before your switch completes. Don't worry, you'll still be able to top up throughout the process, and if you've any credit left on your meter, your old supplier will pay this back.
Energy suppliers are obliged to help those in hardship. One way they do it is by providing the Warm Home Discount, a one-off £140 discount on your electricity bill between October and March. If you're eligible, you'll usually receive a letter each year telling you whether you'll get the discount automatically or if you need to apply for it.
The scheme requires suppliers, by law, to help vulnerable customers pay for energy. It's available for customers who receive pension credit, so if this applies to you and you've a prepay meter, you can get it too. The final decision rests with suppliers – so call up and find out what your supplier will offer you.
For full help on getting free cash to help pay utility arrears, or freebies to cut energy bills, see our Housing and Energy Grants guide.
If you can't switch away from a prepayment meter to save cash, then these tips will help you make sure you use prepay the right way.
It's not just who you pay, but how much you use. Cutting energy is a mix of big and little things.
Turn down the thermostat and wear jumpers, defrost the fridge and check it's not on too high, turn lights off when you leave a room, use energy-saving light bulbs and don't leave electrical goods on standby.
Smart thermostats can also help some save on their energy bills. These gadgets give you greater control over your home's heating, letting you adjust it on the move via a mobile app or online, and set more complicated heating schedules than your traditional thermostat.
They can be pricey though, so see the Smart Thermostats guide to check if they're right for you.
Most suppliers provide around £5-£10 emergency credit after your top-up runs out. But when you dip into the emergency credit it doesn't charge you the standing charge (the fixed charge you pay daily just to be connected), so the next time you top up you have to play catch-up, which can throw your budgeting out.
Unfortunately it's quite rare at the moment, but suppliers are starting to roll these types of meters out now, so it's worth asking.
Smart prepayment meters make it much easier to top up. With some suppliers, these meters allow you to top up online, by text, over the phone or via an app. So there's no need anymore pop to the shops when you're running low to add credit to your card or key.
Smart prepayment meters also make it much easier to switch between prepayment and standard meter types. You no longer need to have an engineer come out to your house and replace your prepayment meters with standard ones – suppliers can simply change it remotely.
To see if you can get a smart prepayment meter, contact your supplier, or for more info, see our Smart Meters guide.
If you're going away, you need to leave enough credit on the meter to cover the daily standing charge, even if usage will be low. Otherwise you may find your credit runs out and appliances switch off while you're gone.
If you've moved into a home with a prepayment meter, tell the existing supplier immediately and don't use the old tenant's top-up card.
Otherwise you may end up having to pay someone else's debt just to get an energy supply. The supplier must, under a code of conduct, reset the meter as soon as reasonably possible.
Lose your card and you'll usually be charged around £10 for a replacement. Any top-ups you've already made should be transferred to the new card.
If you're struggling with debt, there are a few options available – both from the suppliers themselves through 'Energy Trust' schemes, which can help if you have large arrears, and from Government schemes such as Fuel Direct, which lets you pay off energy debt directly from any benefits you receive to help avoid getting deeper into arrears.
A number of providers run 'Energy Trust' schemes, offering help if you have large arrears on your gas and electricity account. With some, such as British Gas, you don't even need to be a customer.
Sometimes, Energy Trust schemes can also help finance other essential household items. Essential items are covered by 'Further Assistance Payments' and can include white goods and boiler repairs. Only those who live in a home supplied by the provider can apply for Further Assistance Payments.
You need to complete a full income and expenditure budget sheet, plus give proof of your income, details on how your arrears built up (eg, owing to illness or redundancy) and say how the grant will help you.
You can apply via these links:
Open to anyone: British Gas Energy Trust.
For other providers or general advice, contact Simple Energy Advice on 0800 444 202 (for England and Wales), Home Energy Scotland on 0808 808 2282 (for Scotland) or the Bryson Energy Advice Line on 0800 142 2865 (for Northern Ireland).
The Government's Fuel Direct scheme (also known as 'third party deductions') lets you arrange to have a small, fixed amount deducted directly from your benefits payments each week to go towards paying off energy debt.
To use the Fuel Direct scheme, you need to contact your Jobcentre (or pension centre if you are claiming pension credit) and give them details of your supplier and what you owe. Your Jobcentre or pension centre will then get in contact with your provider.
If you claim universal credit, a fixed rate of 5% of your entitlement can be deducted and paid directly to your supplier for gas and electricity (and water).
For any other benefits, a set amount of £3.70 will be directly deducted each week to pay off the debt you owe, plus an additional amount to cover your ongoing usage. For example, if you use £5 of energy per week, a total of £8.70 will be deducted directly from your benefits each week.
Be aware though, if the set amount to cover your debt and the additional sum for your ongoing usage comes to less than 25% of your total benefits, the payment to your supplier can be set up without your permission. So be sure before you apply.
You can use Fuel Direct with the following benefits: