Decide if prepayment is right for you

Prepayment, sometimes called pay as you go, lets you pay for your energy in small amounts.

If you have a smart meter, your supplier can change its setting from credit to prepayment. If you have an old-style credit meter, you can swap it for a smart meter or get an old-style prepayment meter installed.

If you have a choice about moving to prepayment, think about how it'll affect you.

You could end up with no gas or electricity

You shouldn’t move to prepayment if running out of credit and having no gas or electricity would cause you a serious problem. For example, if you: 

• are aged 85 or older and live alone

• are disabled or have a health condition

• can’t afford to top up and you’re aged 75 or older

• can't afford to top up and live with children aged 5 and under

If you have impaired hearing or sight, you might find it hard to hear an alert or read the meter. 

If your supplier is trying to move you to prepayment, they have to follow rules from the energy regulator Ofgem. If you don’t think prepayment is right for you, check how to stop your supplier moving you to prepayment.

You’ll need to top up your credit

If you have a prepayment meter, you'll need to buy credit for your meter from a top-up point - often a local shop or Post Office. Your energy supplier will give you a top-up card or key. 

If you find it hard to get to a top-up point, for example if you’d have to travel a long way - you could get a smart meter with a prepayment setting.

If you have a smart meter in prepayment setting, you can:

• top up using your top-up card or key

• top up online or through an app on your mobile phone

If you top up online, you should still keep your card or key in case you need to use it - for example, if the app isn't working.

If you have a health condition or disability which makes it difficult for you to reach, work or top up a prepayment meter, you shouldn’t move to prepayment.

If your supplier is trying to move you to prepayment you can check how to stop your supplier moving you to prepayment.

You could pay less on prepayment

Changes to a government scheme called the Energy Price Guarantee mean you could pay less for prepayment from 1 July 2023. The Energy Price Guarantee will reduce the cost of energy for prepayment when necessary so it’s below the Energy Price Cap. 

The Energy Price Cap is the maximum amount your supplier can charge you for a single unit of gas or electricity if you’re on a standard variable tariff - it’s set by the energy regulator Ofgem.

The Energy Price Guarantee reduces the cost of the energy, not the daily fee charged by your supplier. The daily fee is a fixed amount, so it won’t get lower if you use less energy. 

The daily fee for prepayment might be higher than for customers who aren’t on prepayment. This might mean that your overall bill won’t be cheaper if you use lower-than-average amounts of energy.

Find out how much you pay in a year

If you want to work out your cost per year for gas or electricity, you'll need to: 

1. Multiply your supplier’s daily fee in pence by the number of days in the year

2. Multiply the total kilowatt-hours (kWh) used in the year by the cost of energy per kWh in pence - also called the unit rate. Look for ‘annual usage’ on your bill - this is the total kWh you use in a year.

3. Add the results of step 1 and step 2 together to get your cost per year in pence

4. Divide the result of step 3 by 100 to get the result in pounds - for example, divide 63,042p by 100, which equals £630.42

Example

Emily has a standard variable tariff and wants to know if she will save money by moving to prepayment.

If Emily moves to prepayment she will get the Energy Price Guarantee discount. This means she will pay less for a unit of energy (kilowatt-hour). 

Emily currently pays by direct debit. She pays 7.4p per kilowatt-hour (kWh) for gas and has a daily fee of 29p. On prepayment she would pay 7.035p per kWh for gas and a daily fee of 37.8p.

Emily will pay 0.365p per kWh less on prepayment, but she will pay 8.8p per day more for the daily fee. If Emily uses: 

• 7,000kWh per year of gas, prepayment is £6.57 more overall

• 8,000kWh per year of gas, prepayment is £2.55 less overall

If Emily uses more energy, she will save more from being on prepayment. 

8,000kWh per year is the average amount of gas used in a flat or 1 bedroom house according to the energy regulator, Ofgem. 

The government will change the Energy Price Guarantee every time Ofgem changes the Energy Price Cap. They’ll make sure prepayment energy costs remain below the price cap. 

Ofgem reviews the Energy Price Cap every 3 months. Any price changes from the next review will start on 1 October 2023.

 The Energy Price Guarantee scheme ends in March 2024.

You’ll pay a daily fee

As well as paying for the gas and electricity you use, you pay a daily fee for being connected - known as a standing charge. You pay this with a normal meter too, but when you're on prepayment you need to have credit to pay it - even on days when you don’t use any gas or electricity.  

You still have to pay the daily standing charge even if you don't have any credit on your meter. When you next top up, you'll have to pay back all the standing charges that you owe.

The amount of the standing charge depends on where you live and what tariff and supplier you have. 

Example

Jacintha’s story

Jacintha has gas central heating, which she switched off last summer.

She didn’t top up her gas meter because she wasn’t using any gas.

The meter still took 28p a day for the standing charge, so she soon ran out of credit.

The standing charges built up until Jacintha decided to add some credit because she wanted to switch her heating back on.

By this time Jacintha owed £17.64 in standing charges. When she topped up by £20 the meter took what she owed and she only had £2.36 left. This meant she had to top up again the next day.

Next steps

If you don't want to move to prepayment but your supplier wants you to, you might be able to keep paying for energy after you use it. 

If you want to move to prepayment, you might want to get an old-style prepayment meter installed.