Prepayment meters for business: availability and trade-offs

A business prepayment meter lets you pay for gas or electricity before you use it, instead of being billed afterwards. Some suppliers offer them to businesses, but they are not widely advertised and are not a right. We found no official list of which suppliers offer business prepayment, so the first step is to ask. This guide covers how they work, who they suit, and the alternatives.

How prepayment works

With a prepayment (or "prepay") meter you add credit, by a top-up key, card or, on smart prepayment meters, through an app or online. Energy is deducted from the credit as you use it. If the credit runs out, the supply can stop unless the meter has a backup facility. Whether a business can top up remotely depends on the meter and supplier, so ask.

Compare that with the usual arrangement for businesses: a standing charge and unit rate billed monthly or quarterly, often by Direct Debit (see paying business energy bills).

Is a prepayment meter available for business?

It is supplier-specific. We found no rule that entitles a business to choose prepayment. Points that are clear:

• Ofgem's price cap, which covers household prepayment tariffs, does not apply to non-domestic contracts; see business energy price cap.
• A business prepayment tariff is a commercial product. Its rates, any minimum top-up and any exit terms come from the supplier's own terms.
• Your landlord's agreement may decide: if you are a tenant and the energy is part of your rent, you may have no say. See who pays for empty premises and the landlord guide.

Ofgem's code of practice on installing prepayment meters without permission is written in terms of households, and we could not confirm that it protects business customers. Do not assume it does. If a supplier proposes moving you to prepayment, ask it in writing which rules it is following.

Who might use one

• A new or very small business that has no trading history, so a supplier might otherwise want a deposit. See business energy credit checks and security deposits.
• Seasonal or pop-up sites that are not occupied all year.
• A business that wants tight control of spending.

The trade-offs

Possible plus	Possible minus
You only pay for what you have used, no catch-up bills	Supply stops if credit runs out, which is a serious risk for fridges, tills or heating
May avoid a deposit or credit check	Rates may differ from billed deals; we found no published data, so compare the quote
Easy to see spend	Staff must top up on time, and the cost of an emergency top-up is yours
Fewer billing disputes	Fewer tariff choices; many fixed-price deals are billed, not prepaid

The "possible" plus and minus points are general features of prepay; check each against the actual offer.

A worked example

This example uses invented prices. A kiosk uses 6,000 kWh of electricity a year. Prepay quote: 32p/kWh and 50p a day. Billed quote: 28p/kWh and 60p a day.

1. Prepay: 6,000 × £0.32 = £1,920, plus 0.50 × 365 = £182.50, total £2,102.50.
2. Billed: 6,000 × £0.28 = £1,680, plus 0.60 × 365 = £219.00, total £1,899.00.

The prepay option costs £203.50 more a year, before VAT, which is the price of the spending control. If paying a £300 deposit would otherwise block you, the prepay may still be sensible. If you can pass a credit check, the billed deal is cheaper in this example. Use the business energy cost calculator to run your own figures.

VAT, levy and the usual extras

A prepay price is still subject to VAT at 20%, or 5% where you qualify as de minimis or for domestic or charity non-business use, and to the Climate Change Levy where it applies. See VAT and climate change levy. Ask whether the standing charge is taken from your credit, because if it is you would pay it even when the premises are closed.

Alternatives to a prepayment meter

• Ask for a payment plan if cash flow is the problem: can I get a payment plan for business energy and can't pay your business energy bills.
• Pay by Direct Debit with a monthly figure.
• Offer a security deposit rather than prepay if a supplier insists on credit protection.

Also, if a supplier wants to move you to prepayment because of debt, the guidance on disconnection and reconnection sets out your position, and Citizens Advice and the Energy Ombudsman are the routes if you disagree.

Tenants and shared supplies

If you pay your landlord rather than a supplier, you may be on a sub-meter that your landlord tops up or reads. In that case it is the landlord's arrangement, not a supplier prepayment product, and the rules about fair pricing sit with the landlord. Ask for the price per unit in writing. The question of whether landlords may charge a mark-up is covered in can landlords resell energy to tenants.

Getting off a prepayment meter

If you want to leave, check the contract for notice and exit terms. There is no cooling-off period once a business contract is agreed, even if it was agreed by phone, so read before you commit. If the supplier proposes a smart meter replacement, ask whether you will keep prepay mode.

Questions to put to the supplier

• What are the unit rates and daily standing charge, and are they fixed or variable?
• What happens to the supply if credit runs out, overnight or at the weekend?
• How and where can I top up, and are there fees or minimum amounts?
• Can I see my balance and usage online?
• Is there a contract term or exit fee, and how do I move to a billed tariff?
• Does the meter work if I move premises, or does the arrangement end?

If you use a broker, ask them to show their commission in the Principal Terms; see energy brokers and commission.

Next steps

1. Ask your current or prospective supplier if business prepay is offered and request its full terms and rates.
2. Compare against a billed deal using the calculator above.
3. Ask whether the meter has emergency or friendly-hours credit, and what happens when credit runs out.
4. Put the terms in writing before you sign.