Energy Guides

What is an energy smart meter?

Updated: Thursday 23 August, 2012

By Martin Fagan

Smart meters are set to revolutionise the way we use and pay for our gas and electricity. Energychoices.co.uk tells you everything you need to know about them

The last government, in its infinite wisdom, decided that the best way for Brits to go green, cut their energy consumption and pave the way to a low carbon economy was to install an energy smart meter in every home in the UK.

Energy suppliers will be responsible for replacing over 53 million gas and electricity meters, involving visits to 30 million homes and small businesses. The mass roll-out of smart meters - where the majority of consumers will have them installed - is expected to start in 2014 and be completed in 2019.

Originally, the cost of providing and installing the smart meters was to be met by the energy suppliers, but now the Department of Energy and Climate Change (DECC) has placed the burden of the cost on the customer, who will pay for the mass installation - currently budgeted at £11.3billion - through higher energy bills.

It’s thought the cost won’t be a one-off installation charge, but rather an extra amount added to the bill - effectively a rental charge. However, none of the “big six” energy suppliers - British Gas (www.britishgas.co.uk), EDF, E.ON, Npower, SSE and Scottish Power (www.scottishpower.co.uk) - has confirmed quite how the cost of a smart meter will be added to energy bills.

What is a smart meter?

The idea behind smart metering is that precise meter readings of your energy consumption are sent to your supplier which, in return, ensures a very accurate bill and puts an end to the frustration of estimated billing.

Although all smart meters do roughly the same job, they work in a number of different ways as their development is still in the early stages. Some smart meters use an in-built sim like a mobile phone to send the data to the energy supplier, while some meters are being developed that use radio signals.

What are the benefits of smart meters?

The first benefit is that your bills will be accurate - no more estimated bills and under or overpaying. The spin-off benefit from this is never again having to wait at home for someone to come and read the meter.

However, taken in isolation, a smart meter itself won’t give you real-time information on the amount of energy you’re consuming and how much it’s costing. It’s easy to confuse a smart meter with an energy monitor or else think they’re different names for the same thing.

One of the widely-trailed benefits of smart meters is that consumers will have real-time information on their energy consumption to help them control and manage their energy use, save money and reduce emissions, but this will only be the case if you have both a smart meter which, as well as sending accurate reading to your energy supplier, is also sending accurate reading to an energy monitor and it’s through this device you see how much energy you’re using and how much it’s costing.

Another advantage of a smart meter is they can be switched between credit and prepayment mode. This will mean that if you want to change from a credit meter to a prepayment meter, you won’t have to have the meter replaced, as the supplier will be able to do it remotely.

As a result of smart metering, the DECC says that by 2020 the average electricity and gas consumer is expected to save around £23 per year on their energy bill and estimates a net benefit to the nation of £7.3billion over the next 20 years.

What are the disadvantages of smart meters?

The main criticism aimed at smart meters is that the cost of installing them, when added to the average household energy bill, will be far greater than the savings made.

For example, using the DECC’s prediction that a smart meter will save the average household around £23 a year and an energy company charges £3 a month for the meter, the average household will pay £13 a year extra.

In theory, your energy supplier could limit the amount of electricity it supplies to you, which is known as “load limiting”. Just as car insurers offer cheaper premiums to motorists who drive fewer miles than average, so smart meters will make it possible in the future for energy suppliers to offer cheaper tariffs to low consumption households with a “load limit”. Conversely, energy suppliers could use this function to withhold energy if you fall into debt and limit your supply until any debts are repaid.

Energy regulator Ofgem has received reassurances from all the major energy suppliers they will not load limit without first notifying Ofgem. However, this isn’t a case of energy suppliers saying they won’t load limit smart meter customers, it’s just they’ll notify Ofgem before they do.

Smart meters will also mean big savings for energy suppliers. For one thing, because customers receive accurate bills, smart meters reduce the risk of energy companies being owed vast sums by households whose bill have been underestimated, which eases the companies’ cash flow. Another saving for the energy companies comes with not having to employ an army of meter readers.

However, as suppliers don’t have a great reputation for passing savings on to their customers, even the Parliamentary Public Accounts Committee said if energy companies fail to pass on savings then smart meters will be “of little benefit to households”.

And finally...

Like it or not, smart meters are about to become a reality. Even if your energy supplier is reluctant to pass the savings it makes on to you, by using the smart meter and energy monitor to assess your household consumption, you can see if changing the way you consume energy or switching supplier could save you money on your bill.