Pay-as-you-go energy — also known as prepayment energy — works differently from standard direct debit tariffs. It offers budgeting control, but often at a higher cost.
To compare pay-as-you-go energy deals properly, you must understand how they are structured, why pricing differs, and what options are realistically available.
In this guide, Utility King explains:
What pay-as-you-go energy is
How prepayment meters work
Why pay-as-you-go tariffs are often more expensive
How to compare prepayment energy suppliers
When switching makes financial sense
Our goal is to help you balance control with cost efficiency.
What Is Pay-As-You-Go Energy?
Pay-as-you-go energy means you pay for gas or electricity before you use it.
Instead of receiving a monthly or quarterly bill, you:
Top up your meter
Add credit in advance
Use energy until the credit runs out
This system is typically managed through:
Key meters
Card meters
Smart prepayment meters
Online top-up systems
You are not billed after usage. You are billed in advance.
How Prepayment Energy Tariffs Work
Although the payment method differs, the cost structure is still based on:
Unit rate (price per kWh)
Standing charge (daily fixed fee)
Your total cost is calculated as:
(Usage × Unit rate) + Standing charges
The key difference is when you pay, not how the energy is calculated.
However, pay-as-you-go tariffs often have:
Higher unit rates
Higher standing charges
This is why careful comparison is essential.
Why Pay-As-You-Go Energy Can Be More Expensive
There are several reasons prepayment energy tariffs may cost more:
1. Higher Administrative Costs
Prepayment systems require additional infrastructure and support.
2. Higher Financial Risk for Suppliers
Suppliers factor in operational costs and payment handling.
3. Reduced Competition
Fewer suppliers offer competitive prepayment deals compared to direct debit tariffs.
However, regulatory price caps often limit how much more expensive prepayment tariffs can be.
Still, even small differences in unit rate can add up significantly over a year.
Who Uses Pay-As-You-Go Energy?
Pay-as-you-go energy may suit:
Households managing tight budgets
Tenants in rented properties
Customers who prefer spending control
Those avoiding debt accumulation
It provides immediate spending visibility.
But it can also create risks — especially during winter when energy consumption increases.
How to Compare Energy Deals for Pay-As-You-Go
When comparing prepayment energy suppliers, focus on the following.
This is the most important factor for high-usage households.
Even a small difference in price per kWh can significantly impact annual cost.
Standing charges apply daily, even if you do not use energy.
Low-usage households should examine this carefully.
Some suppliers offer smart prepayment meters that allow:
Online top-ups
App-based monitoring
Remote switching between credit and prepayment mode
These features improve flexibility and control.
Energy prices vary by region.
Always compare tariffs based on your postcode.
Check whether the supplier offers:
Emergency credit options
Friendly credit (overnight or weekend protection)
Clear top-up support
Service quality matters more when energy access depends on real-time payments.
Can You Switch Pay-As-You-Go Energy Suppliers?
Yes.
Switching pay-as-you-go energy suppliers is:
Safe
Regulated
Administrative only
Non-disruptive to supply
Your electricity and gas continue flowing through the same network.
However, you may need to:
Replace your prepayment meter
Upgrade to a smart prepayment meter
Clear outstanding debts (if applicable)
If you owe money to your current supplier, switching may be restricted until the balance is addressed.
Can You Switch From Pay-As-You-Go to Direct Debit?
Yes — and this can often reduce your annual energy costs.
If you:
Have stable income
Can manage monthly budgeting
Have cleared existing debt
Switching to direct debit may provide access to cheaper tariffs.
At Utility King, we frequently see significant savings when households move from prepayment to fixed monthly billing.
However, prepayment remains valuable for customers prioritising strict spending control.
Is Pay-As-You-Go Energy Covered by a Price Cap?
In regulated markets, prepayment tariffs are often subject to a price cap.
This limits:
Maximum unit rate
Maximum standing charge
While this protects customers from extreme pricing, it does not guarantee the lowest possible rates.
Comparison still matters.
The Real Cost of Pay-As-You-Go Energy
When comparing energy deals for pay-as-you-go, consider the full annual cost.
For example:
If a prepayment tariff has a slightly higher unit rate than a direct debit plan, that difference multiplies across thousands of kWh per year.
Budgeting control is valuable — but cost differences should be understood clearly.
The key is making an informed decision, not an automatic one.
Utility King's Perspective
At Utility King, we believe pay-as-you-go energy is about financial control — not necessarily savings.
It offers:
Spending discipline
No surprise bills
Reduced risk of debt
But it may come at a higher annual cost.
When comparing energy deals for pay-as-you-go, we recommend:
Reviewing total annual cost
Comparing against direct debit alternatives
Evaluating flexibility needs
Checking smart meter compatibility
Energy affordability is not just about price — it is about manageability.
But where possible, cost efficiency should not be ignored.
Frequently Asked Questions
Is pay-as-you-go energy more expensive?
It is often slightly more expensive than direct debit tariffs, but pricing is regulated.
Can I switch pay-as-you-go suppliers?
Yes, provided you meet eligibility requirements and clear outstanding debt.
Does pay-as-you-go energy have standing charges?
Yes. Standing charges apply daily, even if you do not use energy.
What happens if I run out of credit?
Your supply may stop unless emergency credit is available.
Can I move from prepayment to direct debit?
Yes, if you meet the supplier's requirements and manage payments reliably.
Is pay-as-you-go better for budgeting?
It offers strong spending control but may cost more annually.
If you want to compare energy deals for pay-as-you-go and determine whether it remains the right option for your household, Utility King can help you evaluate both cost and flexibility — ensuring your energy choice supports your financial stability.