Pre-paid Electricity and Gas Meters – more expensive or economical?

It is commonly known that a pre-paid electricity meter is the most expensive way to buy electricity. Yet, depending on which site you believe, between three and six million people receive their electricity through a pre-paid meter.

Some customers with previous electricity debts can only receive their electricity through a meter. This way the electricity company can set the electricity rate at a higher rate to recoup the debt while ensuring current usage is also paid for. On the other hand, there are millions of people that choose to have a meter. These people find it an easier way to budget and like to avoid receiving a large bill every quarter. So despite paying more for the electricity is it actually possible to make a saving using a pre-paid meter?

The Cost of having a pre-paid meter

Despite campaigns to bring costs down pay-as-you-go meters are still the most expensive way to receive utilities. According to energy helpline, for exactly the same amount of energy an average pre-pay meter will cost £1,300 and the cheapest possible pre-pay meter £1,119. This is compared to the cheapest credit meter that would cost £1,040. (Stats correct as of August 2012. Consumption based on average usage of typical household, using a ‘medium’ amount of energy.)

So despite claims of the contrary, pre-paid meters are still not as cheap as buying electricity on credit. However, many still claim that a pre-paid meter is the best option for them.

Budgeting with Pay-as-you-go meters

Many meter users cite the fact they avoid big bills as the major plus of using a meter. Pre-paid meters allow users to budget with more precision and know exactly what they are spending on energy. This is where the biggest saving can be made with pay-as-you-go meters.

Being able to literally see money being spent on power; as your meter reading recedes can be the most powerful motivator to save energy. You remember to turn lights off, know exactly how many times you have used the washing machine and will consider energy usage whenever you turn on an appliance. The best comparison is with mobile phones. Most of us are now on contracts but remember back to when you were on pay-as-you-go. Every text message you were aware that you were spending money. You would not make unnecessary calls. Now on contract, how many people exceed their initial contract cost as they have no idea how much of their permitted usage they have used.

If your household struggles to save energy it may be a meter, despite the extra costs, save money. It is also worth remembering that you can move pre-paid tariffs from different companies to get the best deal possible. You do not have to have gas and electricity from the same provider. You can undercut providers by shopping around. There can be big differences between tariffs and some good incentives, such as money back, vouchers or gifts, if you sign with certain providers.

Is it worth getting a pre-paid meter?

In reality, a pre-paid meter is not an economical decision unless you really need it as a deterrent to save power. A credit meter will always provide better value for money. However, if you think it would be something worth trying you can contact a provider and ask them to install a meter.

For those already with a meter, it would be a good idea to upgrade to a credit meter if you are permitted to do so. If receiving a big bill deters you from having a credit meter you can set up a direct debit system which takes money out on a regular basis, so when the bill arrives you have already paid most of it.

It is also worth noting that when prices change it can take a while for the provider to update your system meaning you are paying old rates and will be landed with a bill in the post anyway.

Pre-payment is a method to avoid if you have the means and discipline to make the most of credit discounts. If your household is using far too much energy though, and an energy monitor will not be enough to help cut usage down, it could provide the perfect motivation to start saving.

By Michael Hallam