

How does a prepaid meter work?

If you’re looking for an alternative way to pay for your energy, prepaid meters (also known as pay-as-you-go or top-up) could hand you a convenient and flexible solution.

The invention of smart prepayment meters is making it easier for those with prepayment meters to take control of their energy. Thanks to their online connectivity, smart meters can be topped using your smartphone, allowing users to top-up whenever and wherever they please.

According to an Ofgem report in 2017, 16% of the UK’s energy customers are choosing to pay for their energy upfront. But how do prepaid meters work, and what advantages could they bring to your household?


How prepaid energy works?

Fundamentally, prepaid energy changes the way you pay for energy. Rather than being billed monthly or quarterly for the energy you have used, prepaid energy is purchased before you use it. The meter displays how much money you have remaining, and when it runs to zero, it must be topped up for your energy supply to resume.

Prepaid meters come in one of three forms:

1. Key meters

These are electronic keys that contain code that relates to your tariff. The keys are topped up at your local post office or corner shop (or anywhere with a Payzone logo outside it). Once you’ve bought some credit, insert the key into your home meter to top up.

2. Smart card meters

These have online connectivity linked to an account held online. Smart meters allow consumers to top their energy up online as well as in local shops or post offices.

3. Token meters

Operated by inserting tokens or sometimes coins, you’re unlikely to come across one of these today.
The second of those methods is becoming increasingly popular. Smart meters give consumers greater flexibility when topping up their energy, usually by providing you with more payment options (see “How to buy prepaid energy online” below).

Prepaid energy can be purchased for both gas and electricity. For gas, you’re likely to pay a single rate regardless of when you use it. This could also be the case for electricity. 
If you have an economy 7 meter however you may get two or even three rates. These will differ depending on when you use your electricity. Rates are often lower during the day (when there is less demand for electricity), so you could find yourself saving money if you’re at home when most people are at work. 

How to buy prepaid energy online

Smart card meters are becoming increasingly popular thanks to their connectivity capabilities. Coupled with a smart meter, this type of prepaid energy helps people top up more easily using your smartphone With this type of prepaid energy system, you can access a linked online account that allows you to top up. Plus, suppliers often have their own mobile app, allowing for a seamless energy top ups wherever you are. 

Alongside these new ways to pay, you can still use your local shop if you prefer. Take your smart card down to your nearest shop, and you can load money onto it there.  


The advantages of a prepaid meter 

For some energy customers, prepaid is the best way for them to manage their consumption. It brings with it a number of significant advantages:

Control what you spend

Most notably, a prepaid meter can bring you control. Ultimately, you choose when, and how much, money to put on your meter, and track how long it takes to use up that energy.  

Avoid unexpected bills

When paying for your energy on a quarterly basis, bills can sometimes be unpredictable. A month where you’ve used an excessive amount of energy can lead to you being hit with a hefty bill. If you can’t afford to pay it all off, you could find yourself slipping into debt. 

With a prepaid meter, the dangers of this are minimised, as you only pay for the amount of energy you can afford at any time.

Increasingly competitive pricing

The price of prepaid energy can differ across providers, so it is important to do your research. Depending on individual, it could also fit your budgetary requirements better. Plus, in 2017 the government introduced the “Prepayment Meter Price Cap”, ensuring that tariffs on prepaid energy don’t exceed a certain level.  

You can still switch

Just like any other energy payment method, you can always switch suppliers in search of a better deal. In fact, it’s encouraged, as shopping around is always going to help bring the overall price of your energy down. 


How to apply for a prepaid meter

If you’ve decided a prepayment meter is the best option for you, get in touch with your energy supplier to have a meter installed in your home (if you don’t already have one). It will likely be installed right next to your existing meter, so it’ll be helpful if you can easily reach it.

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