Author: Sam Hubble
Recently we’ve been doing a lot of public outreach and have been offering advice and answering queries on a wide range of energy-related subjects.
Something that repeatedly pops up is the confusion surrounding pre-payment meters (PPMs), and the debate over whether a PPM may be the most appropriate form of payment for individuals in different circumstances.
According to the Department of Energy and Climate Change there are approximately Four million homes with PPMs installed. As such, we thought it would be helpful to use this blog to briefly cover the basics and steer you towards sources of information to further discover whether they may be beneficial to you.
As always, if you’ve got any queries or would like advice, call us on 01633 223111, Email or Tweet us.
Some of the most common questions we get asked are answered below.
What are PPMs? How do they work?
With prepayment meters you have to pay for gas and electricity before you use it – a bit like a Pay As You Go mobile phone. You may use a token, key or smartcard to ‘top-up’ at recognised PayPoints or Post Offices. Some suppliers also offer smartphone top-up (via an app, text, online or over the phone).
Why are they installed?
Suppliers may install a PPM if householders get in to debt or don’t stick to payment plans. Some landlords may also opt for PPMs to reduce the risk of being left with outstanding debts after tenants have moved out.
In some circumstances you may be able to refuse having a PPM installed. For more information check out this article from Citizens Advice.
What are the pros and cons of PPMs?
The main advantages of using a PPM are that they can help people to manage their energy usage and as a result prevent unexpected bills, which then helps to manage and avoid debt.
They can also enable arrears to be slowly cleared by suppliers taking off an agreed amount when credit is added to the meter. NB: For this reason if you move into a property with a PPM it is important to register as the new householder ASAP otherwise you may pay the wrong rate that was originally set up for the previous occupier’s debt repayments.
For these reasons, when used appropriately they can be very useful in assisting people to use energy most effectively without getting into financial difficulties.
However, there are also drawbacks that need to be considered. People using PPMs generally pay more for their gas and electricity due to standing charges and a lack of access to the cheapest energy tariffs available. According to Money Saving Expert the cheapest PPM tariff costs around £1025/year, whereas the cheapest tariff available for credit customers costs roughly £750/year, a difference of approximately £275/year.
The other main drawback of PPMs is the risk of supplies being cut off if you fail to top-up your meter. Whilst there is usually an ‘emergency’ buffer to provide some protection from instant cut off due to an empty account, this amount is often only £5 or £10, meaning that once this has also been spent the supply will be cut.
Can I switch suppliers if I use a PPM?
Yes. Most suppliers have pre-payment tariffs, which can vary as much as standard tariffs. It is worth investigating if you could change suppliers as you may be able to save a large amount of money.
This article provides an overview of PPM supplier switching and how new schemes such as OVO Energy’s Smart PAYG scheme and App are changing how people use and pay for their energy. Get in touch with us if you’d like more info on how to switch energy suppliers.
NB: It is important to note that even if you switch suppliers and find a better-value PPM rate, if you use a PPM you are still likely to be paying more than cheaper tariffs that are only available to customers who are willing and able to pay via Direct Debit.
Can I remove a PPM?
The short answer is yes. Indeed, if you feel that a credit meter better suits your needs and financial situation (perhaps obtain sound financial advice to determine this) then removing your PPM will enable you to start accessing better tariffs.
The longer answer is yes, but the process may be complicated and slow, and is dependent upon your circumstances (such as who supplies your energy, how long you have been a customer, how long you have lived in your current property, and whether or not your supplier believes you will be able to keep up with repayments – often determined by a credit check). You will also usually have to demonstrate that you are prepared to pay for your gas or electricity by Direct Debit, and some (though not all) suppliers may charge to remove a PPM (typically about £50).
As is the case for many topics, Money Saving Expert have produced an excellent article that explains in more detail how to go about switching from a PPM to a credit meter.
So there you have it, a very brief overview of Pre-Payment Meters and an attempt to answer FAQs people have about them. If you’d like any more information or advice please don’t hesitate to get in touch with us, that’s what we’re here for!