MILLIONS of households are on pricey pre-payment meter deals that are set to rise further as energy bills increase.
Here is how pre-payment energy customers can cut their costs.
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There are two main types of energy meter.
A standard meter tracks how much gas and electricity you use and a supplier will set your bill based on these numbers and how much they charge for each unit of energy .
Another option is a pre-payment meter.
This is where you effectively pay-as-you-go for your energy and top it up using a key, card or app.
Using a pre-payment meter can be more expensive than a standard meter.
Here is what you need to know.
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What is a pre-payment meter
Around 4.3million people in the UK are on pre-payment meters.
They are often installed in homes that have fallen into debt so a customer can manage their bills better or by landlords in some rental properties.
Users have to top up a pre-payment meter in advance in the same way you would make sure you have enough credit on a pay-as-you-go phone.
You can usually top up these meters at recognised PayPoint andPayzone shops or at the Post Office.
Depending on the provider, you may also be able to make top-ups through an app.
What is the difference between being on a pre-payment and standard meter tariff?
Some people find that a pre-payment meter helps them plan their spending and avoid surprise bills.
You only pay for the energy you have budgeted for but it is important to keep the meter topped up so you don’t lose power in the middle of a wash or during the finale of your favourite streaming series.
Pre-payment customers usually spend more on their energy though as the tariffs on offer from suppliers are usually more expensive than standard meter deals.
A household with a standard meter can spread the cost of their energy use each month over the term of a contract and their bill will be more closely related to their usage as long as they provide regular meter readings.
Energy suppliers also often provide discount to customers paying by direct debit, which isn’t available to those on pre-payment deals.
What happens if a pre-payment supplier goes bust?
Energy suppliers offer both standard and prepayment meter deals.
Customers are given the same protections if their supplier fails regardless of the type of meter.
Your energy supply will continue and you can still top-up your meter if your provider collapses.
Energy regulator Ofgem will appoint a new supplier to takeover.
Can you shop around for a pre-payment deal
It is usually possible for pre-payment customers to shop around for better deals on comparison websites to see if you can pay less for each unit of gas or electricity.
But pre-payment meter customers are facing similar issues to those on standard meters as rising wholesale gas costs have reduced competition in the market and pushed up prices.
That has made it harder for all types of customers to shop around and find better deals, leaving many better off on standard default tariffs for now.
Pre-payment meters and the price cap
Energy regulator Ofgem launched a price cap in 2019 to limit how much out-of-contract customers are charged by suppliers.
Customers on standard meters will see the cap rise from £1,277 to £1,971 in April 2022.
Pre-payment meter customers also have a cap but it is set higher.
The price cap for pre-payment meter customers will rise from £1,309 to £2,017 in April.
Customers may still pay more as the cap is on the unit cost that suppliers can charge for energy rather than on the bill and these figures reflected typical household usage.
Will pre-payment meter customers get the energy rebate?
The government unveiled plans for a £200 energy rebate last week to help households cope with the increased price cap.
All domestic energy users will receive £200 off their bill from October 2022.
This will need to be repaid from April 2023 at £40 per year for five years.
The government still needs to consult on how the scheme will work but the Treasury has said pre-payment customers will be included.
You may get a voucher or credit on their account to cover the discount.
How to save on energy bills
Switching deals right now may not be possible but it is worth keeping an eye n comparison websites to see if better deals come up.
The difference in price caps between standard and pre-payment meters means customers on pay-as-you go deals could typically be paying £46 a year more.
It may be worth asking your current supplier if you can switch from a pre-payment meter to a standard one to save money.
There may be a charge for doing this but you could make savings over the long term by paying less for your energy.
Tenants may have to ask for their landlord’s permission to get a meter changed.
You need to be sure that you can afford the repayments and you may need to clear any debts on the account and pass a credit check.
Low-income households and those on benefits can also access energy bill support.
This includes the Winter Fuel Payment, which gives people over 65 between £100 and £300 towards the cost of keeping their homes warm during the colder months.
Older people on pension credit or other benefits may be eligible for a £140 payment towards heating costs under the warm home discount scheme.
It is also worth checking with your local council for household support grants that are aimed a people on low incomes or contact charities such as StepChange, Citizens Advice and Turn2Us.
We have rounded up 44 ways to cut your energy bills including turning down the thermostat and keeping doors shut.
Some people are question if you can opt out of the energy rebate.
Here is how the government’s cost of living support measures may help you.
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