Paying for your energy
Monthly direct debit
This method of payment offers the largest choice of tariffs and is often discounted. You pay a monthly amount straight from your bank account, the amount depending on your yearly usage. This can be helpful in spreading the costs of high winter bills over the year, however, keep in mind your supplier may increase or decrease your direct debit if your estimated usage changes.
Weekly/fortnightly/monthly card payment agreement
This is a payment agreement set up between you and your supplier to pay a set amount towards your bill every week, fortnight or month. You may still get a bill if your payments haven't covered your energy usage or if you do not keep to your agreement plan. This payment method does not offer many discounts or tariff options and you will need to remember to pay your agreed amount on the date specified by your supplier which can be inconvenient, but it does allow you to spread the cost of your energy bills to avoid having to pay a big bill all in one go.
Prepayment meter
Prepayment meters are a way to pay for your gas and electricity before you use it. They can be topped up with credit, brought from a local pay-point, using a key or card and because you pay for your energy up front, you avoid any monthly/quarterly bills and this can help some people budget more effectively. Visit our prepayment meter page [https://www.coventry.gov.uk/home-energy-warmth/help-energy-bills-tariffs-meters/4] for more information to help you decide if a prepayment meter is right for you.
Fuel Direct
Payment for fuel and any fuel debts you owe is taken directly from your benefits before they are received. This payment method can help people budget more effectively but Fuel Direct can give you little choice of tariff option and discounts. Any debts will be paid back at a suitable rate depending on your benefits and the debts you owe and once this agreement is set up, you should not receive any debt collection letters. If you are interested in this payment method you will need to speak to your Job Centre or pension centre.
Quarterly bill
Paying for your energy on receipt of your bill can give you control over when you pay for your fuel however it can be difficult to budget because of the large differences between winter and summer bills. This payment method can give you a choice of different tariff options however there are few discounts available.
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Tariffs
There are many types of energy tariff available to choose from, all with different benefits. To find out which tariff is likely to be the cheapest for you, use an Ofgem Code of Confidence price comparison website [https://www.ofgem.gov.uk/consumers/household-gas-and-electricity-guide/how-switch-energy-supplier-and-shop-better-deal/compare-gas-and-electricity-tariffs-ofgem-accredited-price-comparison-sites].
Tariffs are made up of a unit cost, measured in pence per kWh, and a standing charge measured in pence per day or week. Some tariffs have no standing charge which maybe beneficial to those who are low energy users.
Standard
This is often your supplier's basic tariff. It is usually a variable tariff where your supplier can increase or decrease your unit rates. Your supplier will normally change you onto this tariff if your current tariff ends. It is worth remembering that while this tariff often has no exit fees, it can be one of the more expensive tariffs because they dont have any discounts.
Fixed
These tariffs will be set for a fixed period of time where the price of a unit of energy will stay the same for the length of the deal. These can work out cheaper in the long term if the cost of energy goes up however if the cost of energy goes down, you may be stuck with a higher unit cost and need to pay an exit fee to join a new cheaper tariff. These tariffs are not available for all payment methods.
Variable
These tariffs offer unit rates that can go both up or down. Sometimes these tariffs will track at a certain percentage lower than the standard variable tariff for the length of the deal. These tariffs may only be available with certain payment methods.
Paperless
Paperless tariffs, particularly if you pay by direct debit, are often the cheapest. You can monitor and manage your account online and submit readings. You must have access to a computer and be able to take regular meter readings as you will no longer receive a paper bill.
Dual Fuel
This is where you pay for your gas and electricity together through the same supplier. These tariffs can be cheaper and you often get a discount by having both fuels with the same supplier.
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Meters
Standard credit meter
The majority of households at present have a standard credit meter. When this meter is read by yourself or your supplier a bill is generated. Those who have these meters pay for their energy after they have used it. If your supplier does not receive a meter reading they will estimate your energy usage and therefore your bill.
Prepayment meter
In contrast, those who have a prepayment meter pay for their energy before they use it. This type of meter needs to be topped up with credit in order for energy to be used, once the credit has run out the meter will need to be topped up again. Because you pay for your energy before you use it, you should not receive any bills.
Economy 7
Economy 7 meters are a dual rate meters that can charge different rates for the electricity you use during the night and day. The night rate is much cheaper than the day rate, therefore this type of meter suits households that use the majority of their electricity at night. For this reason, Economy 7 meters are most widely used in homes that have electric storage heaters and immersion heaters that heat up and use electricity at night when it is cheaper. Contact your supplier to check which kind of meter would be most cost effective for you. Your supplier will also be able to advise when your cheaper electricity rates occur.
Reading your meter
For all types of meters it is a good idea to read your meter regularly and pass on these readings to your energy supplier. This will avoid any estimated bills so you are only paying for the energy you have used in that period, it will also help you to keep track of how much your bill is likely to be. If you struggle to read your meter because of a health condition, contact your supplier as they may be able to move your meter to a different location or get someone to come out to read your meter for you more regularly. For guidance about reading your meter, Citizens Advice has created a guide to reading your gas and electric meters [https://www.citizensadvice.org.uk/consumer/energy/energy-supply/your-energy-meter/how-to-read-your-energy-meter/].
Smart meters
Smart gas and electricity meters are a new type of meter, currently being installed across the country. Smart meters can be used in prepayment or credit mode, however not all meters have an Economy 7 function at present.
A smart meter records your energy use and sends this information back to the utility company. For this reason, you will no longer need to read your meter and there is no need for estimated bills.
The meter comes with an in-home display unit that can tell customers how much energy they are using and how much this costs. In addition, the display unit can help you compare your current usage to that of the previous week, month or year. To find out more about smart meters and how they work, you can visit Smart GB's website [https://www.smartenergygb.org/en]. They are an independent organisation promoting the rollout of smart meters in the UK.
For information about when your supplier will be installing meters, contact them directly as the various suppliers will be installing meters in different parts of the country at different times.
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Prepayment meters
Prepayment meters are a way to pay for your gas and electricity before you use it. They can be topped up with credit, brought from a local pay-point, using a key or card and because you pay for your energy up front, you avoid any monthly/quarterly bills. Currently, 15% of all energy consumers pay their energy bills using prepayment meters - this is higher than at any other time. Before getting a prepayment meter, it is a good idea to go through the advantages and disadvantages of different payment methods to work out which payment method is best for you and your circumstances. For a prepayment meter, the advantages and disadvantages are:
Advantages
- Meters can be set to recover debt at an agreed rate
- Greater control of how much you spend on your energy bills
Disadvantages
- Big seasonal differences in top up payments, especially winter gas payments
- Credit can run out at inconvenient times such as in the middle of the night
- Cheaper tariff options are often not available to prepayment customers
- Can be left without gas and electricity if don't have the funds to top up
Repaying fuel debts
Your supplier may ask you to have a prepayment meter if you get into debt with your energy bills; around 60% of prepayment meters are installed for this reason. Before getting a prepayment meter it is worth exploring other repayment options with your supplier first as often these meters can be more expensive than other payment methods.
If you get into debt with your supplier, call them as soon as you are able to discuss your options. You may be able to set up a repayment plan without having to have a prepayment meter. If you do decide to have a prepayment meter fitted make sure to agree on a repayment amount that you are able to afford.
If you are paying back a debt through your meter, call your supplier to check if they will consider reducing your weekly repayment amount. This will mean more of the money you top up with will be credit. It will however take longer to pay off your debt.
Standing charges
The majority of energy tariffs, whether you have a credit meter or prepayment meter, have a standing charge. With a prepayment meter you will usually pay a standing charge whether you use your gas/electricity or not, and this can cause problems for some people. For example if you are away from your home for a holiday/ hospital stay, even though you may not be using any fuel, your meter will still deduct your standing charge. It is worth topping up your meter before you go away to ensure it doesn't go into debt as this money will have to be taken off your credit top ups when you return.
Currently using a prepayment meter?
Try to keep your meter topped up as regularly as possible to avoid relying on your emergency credit. Your emergency credit usually costs the same amount as your standard credit, however while you meter is using emergency credit, most suppliers will not deduct your standing charge or any debt repayments you have. Instead this will usually be taken off when you next top up and go back into your normal credit. This is often the reason why people think emergency credit costs more. Different suppliers may have different rates at which they take this outstanding balance back so contact your supplier if you are not sure.
It is also worth trying to top up some extra credit throughout the summer months when your energy costs are lower to help spread the cost of high winter top-ups.
If you move into a home with an existing prepayment meter make sure you take a meter reading and call the supplier to advise them you have moved in. This is important to make sure there is no debt on the meter from a previous resident and to make sure your key and account are registered to you.
By scrolling through your meter display screens you will be able to see how much credit you currently have, how much your standing charge is and the cost of the units you are using. You should also be able to see how much debt you are repaying (if any) and how much emergency credit you have. The different screens may be set out differently depending on your meter. If you are unsure about your meter readings call your supplier or visit their website for advice.
Switching with a prepayment meter
You can switch if you have a prepayment meter so long as you have a debt less than £500 on your gas account and £500 on your electricity account. Using an Ofgem Confidence Code impartial comparison site will help you to find out who would be the cheapest supplier for this kind of meter, but will also show you the savings you could make through switching to an alternative payment method. If you wish to switch to a different payment method you will need to call your supplier. Some suppliers will change your meter free of charge, others will require you to pay for the change. If you wish to change from a prepayment meter to a credit meter, it is likely that you will need to pass a credit check before a supplier will do this and you may be asked to pay a security deposit.
Smart meters are a new type of energy meter that will replace your existing gas and electricity meters whether they are credit or prepayment. They are being installed by the different energy suppliers. These meters have several benefits in that they take away the need to read and send meter readings to your supplier and therefore eliminate estimated bills. They provide you with real time readings so you can see how much energy you are using and the cost of that energy. Importantly, if you are considering switching payment methods, smart meters can be set to prepayment or credit meter mode remotely therefore removing the costs to install/remove meters. Further information can be found in the Government's Smart Meter guide [https://www.gov.uk/guidance/smart-meters-how-they-work].