Prepayment and Pay As You Go Energy Tariffs

A prepayment tariff, often called pay as you go, is a way of paying for gas or electricity in advance rather than after you have used it¹. Instead of receiving a bill and settling it later, you load credit onto a meter, and the meter deducts the cost of the energy you draw, plus a daily standing charge, as you go². Around the UK this is a significant part of the market: within one Ofgem consumer archetype, 36% of households are on prepayment meters for electricity and 37% for gas, against a GB average of 12%³.

Prepayment is capped by the same energy price cap that protects direct debit customers, so the unit rates are not open-ended⁴. But the payment method shapes daily life in ways a credit tariff does not: you must top up before the meter will supply, standing charges accrue even when the meter is empty, and debt can be collected automatically from every top up². This page explains how each of those parts works, what protections exist, and what pay as you go looks like in Northern Ireland, where the system is different.

Paying before you use it: what a prepayment tariff actually is

A prepayment meter lets a household pay for electricity or gas in advance rather than after using it¹. In practice this means topping up a card, key or app with money, and the meter then draws down that credit as energy is consumed². The tariff behind the meter is one of the standard types suppliers offer: alongside standard variable, renewable, electric vehicle and fixed price tariffs, suppliers list prepayment energy tariffs, the products most people call pay as you go⁷.

The defining feature is the direction of payment. On a credit tariff the supplier effectively lends you the energy and bills you afterwards; on a prepayment tariff you hand over the money first. That removes the risk of a large unexpected bill, which is why suppliers often recommend prepayment meters to customers already in fuel debt, with the meter set up to repay a specific amount each week based on affordability⁸. It also means the household carries the whole burden of timing: if the credit runs out, the supply stops until more money is loaded⁹.

The differences between the two payment directions come down to a few practical points:

• When you pay: in advance on prepayment, in arrears on credit¹
• What happens if money is short: the supply stops on prepayment; a bill builds up on credit⁹
• Debt collection: automatic, through the meter, on prepayment²
• Visibility: the meter balance shows spending as it happens, rather than on a bill later²

Who is on prepayment

Prepayment is not a fringe arrangement. Ofgem's consumer archetypes work, published in 2024, found that within archetype E13, 36% of households are on prepayment meters for electricity and 37% for gas, compared with a GB average of 12%³. That spread matters: prepayment is concentrated in particular groups of households rather than spread evenly, and the same research shows the payment method clusters with other circumstances rather than being a free choice made in isolation.

People on prepayment meters are also notably engaged with their energy use. Ofgem's 2021 consumer survey found that 48% of those on pre-payment meters monitor their energy use, a higher figure than for households on other payment methods¹⁰. That is the practical effect of paying up front: the meter balance is a running display of what the home is spending, and many households watch it closely.

The route onto prepayment varies. Some households choose it for budgeting; others are moved onto it by a supplier recovering debt, a practice that is now tightly regulated and, where it was done wrongly in 2022 and early 2023, has led to compensation and debt write-offs⁶. The distinction between choosing prepayment and being placed on it matters for what a household can then do, and the later sections of this page cover both.

The three meter types: key, smart card and smart prepayment

There are three main types of prepayment meter: key meters, smart card meters and smart prepayment meters⁵. Key meters take a physical key that carries the credit; smart card meters take a smart card; and smart prepayment meters are smart meters running in prepayment mode, topped up remotely rather than by carrying a token to a shop⁵. Northern Ireland guidance describes the older arrangement plainly: with a pre-payment meter, you use a smart card, key or token, and sometimes coins, to pay for your gas or electricity as you use it¹².

Almost all traditional prepayment meters use either a key or a smart card, bought at an official PayPoint or Payzone outlet⁸. The smart prepayment meter is the modern replacement. Smart meters can operate in credit or prepayment mode, and a household that already has one can be switched between the two without a meter swap¹¹. That flexibility is the practical difference: a traditional key meter fixes the household into prepayment until the hardware is changed, while a smart meter in prepay mode can be moved to a credit tariff remotely.

Ways to add credit: retail outlets, mobile apps and post offices

Where you top up depends on which meter you have. For a non-smart meter, credit is loaded at a local PayPoint store or the Post Office using the meter's key or card; smart prepayment meters can instead use a barcode, and can also be topped up remotely⁹. Independent guidance lists the same recognised routes: PayPoint or Payzone shops, or the Post Office⁵. In Northern Ireland the same outlets apply, with cards and keys recharged at PayPoint outlets like newsagents and Post Offices¹².

Smart prepayment meters widen the options considerably. Top ups can be made online, by phone, by text or via an app, though this varies depending on the supplier, and no gas card or electricity key is necessary¹⁴. Behind the scenes, the smart meter network carries the money: the prepayment service allows consumers to add credit to their meters through an over-the-air top-up sent across the network¹³. That is why an app payment appears on the meter without any physical token changing hands.

One rule is firm. It is illegal to buy credit for a prepayment meter from anywhere other than official outlets, though some organisations such as charities distribute prepayment vouchers to people at risk of being cut off⁸. If a supplier changes, the new supplier will give you information on how to get new key cards and tokens¹⁵.

Standing charges and self-disconnection

A standing charge is a fixed daily amount that has to be paid no matter how much energy is used⁸. The House of Commons Library defines it in the same terms: a daily charge that energy customers have to pay even if they use no energy¹⁶. On a prepayment meter it is deducted automatically, along with any unpaid standing charge or fuel debt, whenever credit is added⁸.

The consequence is the sharpest edge of prepayment. The standing charge, and any fuel debt, still apply even if you completely run out of credit and stop topping up, a situation known as self-disconnection⁸. If a household does not top up, for example leaving the gas meter alone over summer, the daily standing charge builds as a debt, and later top ups may be used to pay off previous weeks' unpaid charges². A meter left empty for a month can therefore swallow a meaningful share of the next payment before any energy is bought.

This is the point to be clear about: running out of credit does not pause the account. The household returns to a meter that owes money, and the first top up settles those arrears first. Budgeting for the standing charge, not just the unit rate, is what keeps a prepayment meter workable through periods of low use.

Emergency credit: what happens when the credit runs out

Once your credit runs out you will not be able to use any energy until you top up again⁹. Before that point, most prepayment meters have an emergency credit budget you can use, like an overdraft, but it is limited⁵. The Centre for Sustainable Energy describes it the same way: prepayment meters give you a small amount of emergency credit designed to maintain your energy supply after your regular credit runs out, and it is reclaimed from the next top up⁸.

The sequence a household moves through is fixed:

1. Normal credit is used up as energy is drawn⁹
2. Emergency credit is activated, and keeps the supply going⁸
3. Emergency credit runs out, and the meter stops supplying energy⁹
4. The next top up repays the emergency credit, plus any standing charge arrears, before buying energy⁸

The mechanics are simple and worth knowing in advance. Emergency credit is not free money; it is a loan against the next payment. When the household next tops up, the borrowed amount is deducted along with any standing charge arrears, so the credit that appears on the meter will be smaller than the sum paid over the counter⁸. A household that repeatedly runs to the end of emergency credit will find each top up buying less energy than the last.

There is no single national figure for how much emergency credit a meter holds; the amount is limited and set by the supplier and meter type⁵. What is consistent is the sequence: normal credit, then emergency credit, then no supply. Knowing where the emergency credit is activated on your own meter, and how much it holds, is the practical preparation.

Repaying debt through the meter

Prepayment meters are the standard tool for collecting energy debt. If a household has debt, the supplier can transfer it onto the prepayment meter, and the money is then recovered automatically each time a top up is made². As well as paying the unit rate for the energy used, the household pays a little extra towards what it owes⁵.

Debt is recovered in one of two ways, or both: as a percentage of what you top up, or as a fixed weekly amount². The percentage method works like this: if the debt repayment is set at 30%, every £10 top up means £3 goes towards the debt and £7 is added as credit². The fixed weekly method works differently: if the repayment is set at £6 a week and the household tops up £10 a week, £6 goes to the debt and £4 is credited, and any missed weekly payments are added up and deducted from the next top up².

The combination of both methods is where households get caught. A meter can be set up so debts are paid by both a percentage and a fixed weekly amount, meaning two lots of debt repayment come out and only a small amount of the top up money actually credits the meter². The Centre for Sustainable Energy's advice is direct:

Suppliers are expected to set repayment rates based on affordability, since prepayment meters for fuel debt are set up to repay a specific amount each week based on what the household can afford⁸.

Cost: capped, levelled, but still shaped by how you pay

The energy price cap applies to default tariffs regardless of payment method: it does not matter how you pay your bills, whether by direct debit or with a pre-payment meter⁴. Ofgem's cap announcements confirm the coverage: you are covered by the cap if you are on a default tariff and pay by standard credit, direct debit, prepayment meter or Economy 7 meter¹⁷. The cap does not apply to fixed, green or time-of-use tariffs⁴.

Within the cap, payment method still moves the numbers. Ofgem operates a levelisation allowance, making sure prepayment and direct debit customers pay the same standing charge¹⁹. But customers who pay by standard credit, meaning cash or cheque, pay more than direct debit customers: Ofgem's cap documentation for October to December 2025 put the additional cost at £136 a year²⁰, and an earlier cap letter for April 2024 put it at £106²¹. The two figures differ because they describe different cap periods, not because the rule changed.

For prepayment households the practical position is therefore mixed. The unit rates are capped on the same basis as everyone else on a default tariff, and the standing charge is levelled with direct debit¹⁹. What prepayment does not do is escape the cap's structure: a household on a fixed or time-of-use tariff is outside the cap altogether, and a prepayment household's ability to reach those products depends on the supplier and the meter, a point covered under which tariffs your meter allows. Smart prepay households can use their meter's energy data to shop around for the best tariff and to look out for suppliers offering prepay customers discounts¹⁴.

Moving off prepayment

Leaving prepayment means moving to a credit arrangement, usually a smart credit meter. Switching from an existing gas or electricity prepay meter to a smart credit meter is straightforward for customers whose supplier can make the change²². The debt position matters at the point of switching: you can switch supplier if you have a prepayment meter and owe your supplier up to £500²³. Debt from a credit account may also have been transferred onto the prepayment meter in the first place, with automatic repayments taken from each top up², so the account history is worth checking before any move.

The direction of travel is not only one way. A supplier can install a prepayment meter without your permission if you are building up an energy debt and other ways of recovering that debt have not worked²⁴, but it must first make reasonable efforts to agree another way for you to repay and offer support if you are struggling to pay²⁵. Where a meter is installed or switched remotely without consent, the supplier must give you £30 of credit once it is done²⁵. On heat networks, the draft consumer protection guidance goes further: when a supplier switches an existing supply meter to prepayment mode without the consumer's consent, the consumer must receive prepayment meter credit, unless that is technically infeasible or outside the supplier's control²⁶.

If your supplier goes out of business, the arrangement continues under a new supplier, which will give you information on how to get new key cards and tokens¹⁵. Households moving into a property should also check the basics of the energy arrangement before arriving: who holds the contract, how charges are calculated, whether charges are metered or estimated, and whether it is possible to switch to a domestic contract²⁷.

Pay as you go in Northern Ireland: Keypad and Share Energy

Northern Ireland runs its own pay as you go system, and the Ofgem price cap does not apply there. The best known product is the Keypad meter, used with tariffs from suppliers including Budget Energy, whose Economy 7 Keypad product is a prepayment meter arrangement²⁸. Share Energy, another Northern Ireland supplier, has a tariff change scheduled for 1 October 2026, which the Consumer Council advises could impact customers²⁸. Top ups work through the familiar outlets: cards and keys are recharged at PayPoint outlets like newsagents and Post Offices¹².

Government support has also been delivered differently in Northern Ireland. Under the Energy Price Guarantee, households received a unit rate discount of up to 13.6p per kWh for electricity and 3.9p per kWh for gas from January to March 2023²⁹, and up to 3.8p per kWh for electricity and 2.6p per kWh for gas from April to June 2023³⁰. The scheme's design was backdated via an additional pence-per-kilowatt payment on top of the base rate from November to March³¹. Separately, a £100 digital pre-paid card scheme supports around 340,000 households in Northern Ireland that use oil as their main source of heating³².

For a fuller picture of the market there, see energy tariffs in Northern Ireland.

Compensation for forced prepayment installations

Between 2022 and early 2023, suppliers forced prepayment meters onto households at scale, and redress followed. If you were moved onto a prepayment meter between 1 January 2022 and 31 January 2023, you might be owed compensation if your supplier installed a prepayment meter in your home or switched you over remotely⁵. Ofgem's own guidance sets the eligibility window as 1 January 2022 to 21 January 2023, with the condition that the supplier did not follow the rules properly⁶.

The redress has been substantial. As part of its market compliance review, Ofgem announced in May 2025 that energy suppliers will write off a further £13 million of debt from customers who had a prepayment meter installed without permission during the assessment period³³. The rules themselves were tightened in 2023, when Ofgem introduced new rules on installing involuntary prepayment meters³⁴. Households can check with their supplier, or through Ofgem's guidance, whether their case falls within the window and the conditions⁶.

Prepayment meters and their effect on household freedom

Prepayment changes what a household is independent of, and what it remains dependent on. On the credit side of the ledger: there is no bill to dispute after the fact, no supplier lending energy and calling it in later, and the meter balance gives a continuous, visible account of what the home is spending, which 48% of prepayment households actively monitor¹⁰. Smart prepayment meters add remote top ups, so the household is no longer tied to shop opening hours, and the meter's data can be used to shop around for better tariffs¹⁴.

The dependencies are just as real:

• Money before energy: no credit means no supply, and the standing charge accrues regardless⁸
• Official outlets only: buying credit anywhere else is illegal⁸
• Automatic debt collection: a household carrying debt may see a large share of each top up diverted before any energy is bought²
• A narrower tariff market: the price cap protects the default prepayment tariff⁴, but fixed, green and time-of-use products sit outside the cap and are not equally available to prepayment customers⁴

The direction of policy is towards the smart meter, which can run in either credit or prepayment mode¹¹, and suppliers are required to offer smart meters to all households and small businesses by the end of 2030. For a prepayment household, that hardware is the bridge: it makes switching between payment modes a remote operation rather than a meter swap²², and it restores access to the wider tariff market described across UK energy tariffs. Prepayment is a workable, capped way to pay, but it is a payment method with conditions attached, and the conditions are worth knowing before the credit runs out.