Any reason someone would CHOOSE to be on prepayment meters?

pochase

Bark01 said:

In general this is what makes up the payment type differential:

Direct debit: Smaller debt risk than Credit
Credit: High debt risk, Credit customers have a much higher risk of running off and creating bad debt.
Prepayment: no debt risk, but a higher cost to serve 

Not all prepay tariffs are created equal:

Old world prepay card/token meters: Needs a whole third party industry to support charging keys/card which adds a considerable cost. The third party system has very limited space for tariffs so the number of tariffs in the market is greatly restricted and reduces competition. There's only enough space for most large suppliers to have ~5 tariffs in the market at any given time and this includes fixes that have customers on but are no longer on sale.

New world Smart meter prepay: The third party system is no longer needed as the suppliers can do it all themselves. The extra cost of using the third party system is removed and the restrictions in tariffs numbers is also gone.  However there is slight higher transactional cost when compared to credit as prepay customers tend to make more payments i.e. they pay a small amount weekly rather than a larger amount every month. They also a higher cost to serve as they 'should' recieve hyper care if there smart meter goes wrong.

In a nutshell Smart only prepay 'should' be in the region of direct debit pricing. It was starting to get there but the energy price issue has slowed development.

Prepaid unit rates are in the region of direct debit pricing, even slightly cheaper in most regions. What is more expensive is the standing charge, 5p for electricity and 10p for gas per day. 

Bark01

pochase said:

Prepaid unit rates are in the region of direct debit pricing, even slightly cheaper in most regions. What is more expensive is the standing charge, 5p for electricity and 10p for gas per day. 

I'm not close to energy pricing anymore but I expect Ofgem have set the PPM price cap for all Prepayment (traditional and smart) and have probably lumped the cost of the third party card/key payments in as a fixed cost. 

Edit : went away and researched it. Its chapters 4 & 5 of the attached
https://www.ofgem.gov.uk/sites/default/files/docs/2020/08/protecting_energy_consumers_with_prepayment_meters_-_august_2020_decision.pdf

But yes as I thought the cost benefits of smart meters are being ignored until they outweigh the negative impacts of traditional meters. The extra cost reflects the extra cost to serve for PPM but actually under recovers it with the under recovered cost being spread across all tariff cap customers.

This is from 2020:

4.31. We have decided to use a tariff differential approach, in order to maintain the current differential between the direct debit and PPM cap levels, before considering the net impact of smart meters. In practice, this means that we maintain the existing PPM differential (£64.07 dual fuel, £24.41 electricity, and £39.66 gas in 2017 prices).

4.32. That means that the PPM uplift could under-recover true efficient costs for customers with traditional meters by up to £17 (£7.95 electricity and £8.97 gas). We have decided to recover additional PPM costs over all default tariff customers.