How prepayment, credit and smart energy meters work

Energy companies use different types of meters to measure how much energy we use, which are based on our credit history.

Household money

Prepayment meters

As the name suggests, with a prepayment meter (also known as a pay-as-you-go meter) you pay in advance for your gas and/or electricity using either a token, card or a key and the credit is then deducted. It works on the same principle as a pay-as-you-go phone and there’s no credit check involved.

However, it’s the most expensive way to pay for your energy, although it might be useful if you’re on a tight budget. And if you don’t have enough money to buy credit, you won’t have any energy, although suppliers do provide an emergency credit amount.

You may be put onto a prepayment meter if you’ve fallen behind with your bill payments and the amount you owe will be taken from your credit.

Prepayment meters can be a hassle if you don’t live near a Post Office or shop that offers top ups. And you have to remember to top them up sufficiently if you’re going away.

Credit meters

The majority of people are on credit meters, which record your gas and/or electricity usage. You’re then charged on either an estimated or accurate basis, depending on the last time an accurate reading was taken from the meter.

Credit meters record your energy usage in various different ways – from aluminium discs in standard meters to dial meters to digital meters.

If you’re on an Economy 7 or Economy 10 tariff, the meter will display two sets of numbers – one for the day rate and one for the night rate.

You may be credit checked before you can use a credit meter, whether that’s when you’re moving into a new home, switching supplier or applying to switch from a prepayment meter.

Switching from a prepayment meter to a credit meter can take several weeks while the meters are switched off.

Smart meters

The Government wants to install smart meters in every UK home. Smart meters use specialist software to send accurate readings of energy usage to energy suppliers. The idea is they will also encourage us to cut our energy usage by showing us clearly how much it costs.

There continue to be concerns over the level of information smart meters will collect.

Some energy suppliers are already installing smart meters, although the main installation programme is now not due to completed until 2020.

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