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What are prepayment meters?

Prepayment meters (PPMs) are meters that require customers to pay for their electricity or gas before they use it – on a pay-as-you-go basis. Customers buy credit, usually with a key or a smart card, and add this to the meter. The credit is used up as the customer uses gas or electricity.

Households can choose to move onto a PPM as part of an agreement to repay an energy debt (or for other reasons). Energy companies can also install a PPM to recover debt without the agreement of the customer.

Are prepayment meters expensive?

PPM customers have historically paid more for their energy than customers paying by direct debit. They also have limited credit in comparison with customers paying by other methods, who have the option to go into arrears.

The gap between unit prices available to PPM and other customers was reduced in 2017 with the introduction of the Prepayment Meter Cap, which was replaced in 2019 by the Default Tariff Cap. The cap has been superseded by the Energy Price Guarantee for the period 1 October 2022 to 31 March 2024.

Under the EPG PPM customers pay a lower unit price for electricity than other customers. However PPM customers pay a higher unit price for gas than customers paying by direct debit, and they pay higher standing charges than all other customers for both electricity and gas.

What is self-disconnection?

Self-disconnection happens when a consumer with a prepayment meter does not have enough money to top-up their meter and their meter cuts out, or when they do not realise that credit on the meter is running out.

In 2020 Ofgem reported that there were 4.3 million electricity and 3.4 million gas prepayment meter customers. It said:

Our data shows that 1 in 7 customers self-disconnected during 2019, and more recent data from Citizens Advice shows these numbers could be higher. Evidence shows that around half of those who are self-disconnecting appear to experience a negative impact. This could be a physical impact such as living in a cold home and/or emotional impact which includes financial distress. Some groups will generally be more affected than others such as households including children and/or the elderly.

According to the Citizens Advice Cost of living dashboard:

  • The number of people Citizens Advice had seen in 2022 (up to October) who were unable to top up their PPM was more than for the whole of the previous five years combined.
  • The number of people they have seen who are having PPMs installed for debt was between 700 and 900 per month in nearly every month since November 2020, up from 400-500 in most months in the previous three years.

Rules for energy suppliers

The energy regulator Ofgem requires energy suppliers to identify self-disconnecting and vulnerable customers and offer them credit and additional support. 

Calls for change

Some opposition parties have called for prepayment customers to be treated the same as monthly bill payers, to pay the same price and have the same allowance to be in arrears with payment.

Further reading

 The following Library briefings provide background on related topics:

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