All suppliers are entitled, under their terms and conditions, to ask for a security deposit to be paid prior to removing a prepayment meter and this will be confirmed by energywatch. As a new tenant, it may not have been your choice to have a prepayment meter but there is a considerable cost to the energy supplier to remove the meter levied by the metering company and it is unfair to expect them to cover this cost only for you to then either dafult on your bills or switch to another supplier.
If you have an account at a previous address with the same supplier, they will usually accept your good payment record at your previous address and remove the prepayment meter without requesting a deposit. If you are unable to pay the security deposit (usually equivalent to the average quarterly bill) then how would you be able to pay your quarterly bills? Likewise, if you use a credit card (rather than a debit card) to pay your security deposit, this is usually a sign that you do not have sufficient funds immediately available and would again be a indicator of your inability to pay your future bills on time and it is not unreasonable for your request to have your prepayment meter removed if you refuse to pay a security deposit.
Also, not all suppliers charge more for having a prepayment meter. ScottishPower, for example, charge their prepayment customers slightly less than their standard quarterly customers meaning that there is no financial advantage if you are with them to switching to quarterly billing (although paying monthly by direct debit would save you money).
At the end of the day, it is not by any means unreasonable for a supplier to request a deposit to have your prepayment meter removed. For them to remove the prepayment meter and then have themselves exposed to the risk of you not paying your bills or switching to another supplier after they have borne the cost of the meter exchange does not make sound business sense. If you are financially sound and in a position to pay your energy bills on time then you are in a position to pay the security deposit.