What is a prepayment meter? British Gas news explained - why do they make bills more expensive

Citizen’s Advice has found that millions of households on prepayment meters went without electricity and gas in 2022 due to the cost of living crisis

Energy bills have been one of the biggest drivers of the cost of living crisis the UK is continuing to face in 2023.

Gas and electricity prices have soared in the wake of the Russia-Ukraine war, which has pushed up the prices of a multitude of products and services, including food items and the cost of a pint, as well as the cost of heating and powering a home. In a bid to keep people financially afloat, the government has been forced to provide energy bills support over the past 12 months.

But this intervention did not stop 3.2 million homes from running out of credit on their prepayment meters during 2022, according to recent Citizen Advice research. It also found 18% of homes that pay for their energy in advance spent two days or more without gas or electricity.

Cost of living campaigners have argued that part of the problem is energy companies forcing people who are struggling to pay their bills over to this form of energy meter. Regulator Ofgem has launched a review into the checks and balances suppliers have in place around putting consumers onto prepayment meters.

But this review may be sped up after an undercover investigation by The Times found British Gas debt agents appear to have been ‘breaking into’ vulnerable people’s homes to ‘force-fit’ prepay meters. The supplier has now suspended applications for court warrants to forcibly fit this kind of meter, while parent company Centrica and Ofgem have launched separate investigations into the allegations.

It all comes ahead of a large increase to energy bills in April 2023 as the government makes its energy price guarantee less generous. MoneySavingExpert Martin Lewis has warned it will take time before falling wholesale prices are reflected in household bills. So, what are prepayment meters - and why do millions of UK households have them?

Prepayment meters tend to be more expensive than standard ones (image: AFP/Getty Images)

What are prepayment meters?

As their name suggests, prepayment energy meters involve people paying for their electricity and gas in advance of using it to heat and power their homes.

These meters usually come with a key or a card that the homeowner has to take to a shop or Post Office offering a PayPoint or PayZone service. Some suppliers now allow people to top their meters up online. Once money has been loaded onto the card, it is used to pay for energy use and standing charges.

Once the credit that has been put into the meter has run out, the household it is providing energy to will be cut off from their energy supply. Some meters do offer emergency credit to keep the lights on, but it is usually only a small amount of money.

You can get a smart meter if you prepay for your energy. Its display will not only show you how much energy you use, but it will also tell you how much credit you have or can access, and whether you’re in any debt.

Why do some homes have prepayment meters?

According to consumer watchdog Which?, around four million British households use a prepayment meter. They are also commonly found in Northern Irish homes.

While some homes use them for convenience - for example, they are used by landlords to protect themselves from their tenants’ unpaid bills - many have them because they are in debt with their energy supplier, and have been forced to change the way they pay for gas and electricity. It means many prepayment meter users tend to be vulnerable people.

Suppliers are meant to work with people who struggle to pay their bills, with changing their meter only one of the options at their disposal. But the evidence suggests they are forcing thousands of people to get prepayment meters by securing court warrants allowing them to access people’s homes.

Citizens Advice estimates 600,000 people were moved onto prepayment meters in 2022. It estimates a further 160,000 people could be moved onto one by the end of this winter unless the government bans forced meter changes.

Energy prices have rocketed in 2022 (image: PA)

The world of ‘force-fitting’ was thrust into the open by The Times on 2 February. A report it released based on an undercover investigation showed agents working on behalf of major supplier British Gas appearing to “break into” the homes of people who had fallen behind on energy payments in order to install prepayment meters - even though some of the customers were known to have what the newspaper called “extreme vulnerabilites”.

British Gas has since announced it is suspending “all warrant activity”, with its parent company Centrica launching its own internal investigation into the allegations revealed by The Times. Centrica CEO Chris O’Shea said the allegations were “unacceptable” and that he was “extremely disappointed” with what had occurred. He insisted his company’s priority was “protecting vulnerable customers”.

Ofgem has launched its own investigation, with a spokesperson saying: “It is unacceptable for any supplier to impose forced installations on vulnerable customers struggling to pay their bills before all other options have been exhausted and without carrying out thorough checks to ensure it is safe and practicable to do so.”

Millions of households with prepayment meters have been forced to go without heating and power over the last 12 months (image: PA)

It is already reviewing the installation of prepayment meters, with Ofgem chief Jonathan Brearley writing in a January blog post that he is concerned about the “sharp growth in households struggling to pay their bills being switched over to pre-payment meters, sometimes without their even knowing about it, leaving them without heating”.

The government has also called for energy companies to stop forcing vulnerable customers onto prepay meters. Energy Secretary Grant Shapps said he would “name and shame” the worst offenders.

Are prepayment meters more expensive?

In a word, yes. In more normal times, they do not allow households to access the cheapest energy tariffs - fixed-rate deals - which are only available to standard meter customers.

They also continue to implement standing charges, even if you are not using any power. These have to be paid off when you next top up your meter.

There is also a time cost for many prepayment meter users, given you have to travel to get to a PayPoint or PayZone. For rural households, this could mean having to spend money on public transport or petrol to get to a shop to top up your card.

Under the energy price guarantee, those with prepayment meters have received a slightly bigger discount than those on standard ones. Average unit rates are 31.8p per kilowatt hour (kWh) for electricity and 6.4p per kWh for gas, compared to 34p per kWh and 10.3 per kWh for those on standard tariffs.

Meanwhile, the government has brought in a voucher scheme so that prepayment meter households can access the energy bills relief scheme.