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Types of Tariff: Prepaid


Other Types of Energy Tariff:


Some electricity and gas customers prefer to pay for their energy upfront. This requires a prepaid meter and signing up to a prepaid energy tariff. What does this mean?

Prepaid Energy Tariffs at a Glance

  • Prepaid energy tariffs are the energy plans associated to having a prepaid meter
  • A small proportion of UK energy customers are on prepaid energy tariffs
  • Prepaid energy tariffs cost roughly the same as standard credit but more than direct debit plans
  • However, prepaid energy tariff allow for energy debt management and energy usage planning
  • Overall, the disadvantages of prepaid energy tariffs seem to outweigh the advantages

How do Prepaid Energy Tariffs Work?

Prepaid energy tariffs are a little like prepaid mobile phone plans: customers buy credit before using it. In contrast, with credit energy tariffs, suppliers bill customers once the energy has been used, at the end of every month or quarter.

Therefore, on prepaid energy tariffs, customers must go to a PayPoint, PayZone or Post Office to purchase the amount of electricity they will need over a given period - say, a month. The voucher they have bought will contain a code that can be typed into the prepaid electricity or gas meter to credit the account and keep electricity and gas on.

According to the Department of Energy and Climate change, 16% of electricity and 15% of gas customers in the UK were on prepaid energy tariffs at the end of 2013.

Prepaid Meters

To subscribe to a prepaid energy tariff your home needs to be equipped with a prepaid meter. Usually, people who sign up for prepaid energy plans move into homes that already have a prepaid meter but sometimes people who are in debt with their energy supplier or want better control over their electricity and/or gas expenses choose to have a prepaid meter installed. In this case, your energy supplier is likely to charge the installation cost - it is rare for energy suppliers to offer free prepaid meter installation.

How much are prepaid energy tariffs?

Prepaid energy tariffs are marginally more expensive than standard credit tariffs but far more expensive than direct debit tariffs, according to the Department of Energy and Climate Change:

Payment method Average annual electricity bill (2013) Average annual gas bill (2013)

Prepaid energy tariff

£605

£758

Standard credit

£602

£767

Direct debit

£557

£701

 

The national energy regulator Ofgem further considers that prepaid energy tariff customers are not well-enough informed about possible savings. On average, Ofgem estimates that a prepaid energy tariff customer who moves to a more advantageous tariff stands to save around £100 per year.

Prepaid Energy Tariffs: Pros and Cons

Advantages of being on a prepaid energy tariff

  • Prepaid energy tariffs prevent having large unexpected bills since the energy is purchased in advance/
  • Prepaid energy tariffs enable customers to plan their energy usage and lower their bills by anticipating when they need to credit their account.

Disadvantages of being on a prepaid energy tariff

  • Prepaid energy tariffs are more expensive than direct debit and, to a lesser extent, standard credit tariffs.

  • The number of prepaid energy plans on the market are limited and far fewer than direct debit or standard credit offers.

  • Fixed price plans are not available to prepaid energy tariff customers, when they tend to be the cheapest tariffs.

  • It can be a hassle to go out and purchase prepaid energy credit, and there is always a risk of an energy cut if the meter runs out of credit.