Utilities: Get smart and you could you cut your energy bills

EDF Energy was alone among the main suppliers in resisting a price rise over winter, but it makes its move today, with 6.5 and 7.3 per cent increases in gas and electricity respectively. Gathering disgruntlement with the big energy suppliers has sparked renewed interest in smart meters, which promise to help households reduce their energy usage and save money.

Smart meters record a household's exact energy consumption, with the electricity reading updated every 30 minutes and gas once a day. The meter sends the information direct to the supplier, which in turn uses the information to give households a detailed look at how they use their energy. Part of the appeal is that they signal an end to the era of estimated bills, offering the assurance that payments will reflect actual usage.

The government wants a smart meter in every household within the next decade, with an eye on the energy-saving opportunities they offer through engaging households with their usage.

It's still early days for smart meters, as the energy minnow First:Utility is the only supplier that offers them. However, the company's biggest presence is in Scotland, where it currently has more than 3,000 households on its books after a 20 per cent growth in the past four months.

Mark Daeche, chief executive of First:Utility, said: "Scotland is a key focus for us and Scottish consumers are ready today for smart meters and want a modern approach to their energy provision."

The government wants to roll out about 47 million smart meters over the next six years, but Daeche said there was consumer demand for the technology to be installed in homes far sooner.

"For far too long, Scottish energy customers have had to suffer the outdated practices offered by the often uncompetitive incumbent suppliers," Daeche said. "We know from our own customer feedback that smart meters are really enabling people to make a difference to their energy bills - 56 per cent of our customers believed that their smart meter and access to energy usage information had led to a change in their behaviour."

Research by First:Utility found that just over half of Scottish households would like to see smart meter technology in their homes in the next year.The survey found that among the options for improving their energy bills, Scottish homeowners would like to see accurate rather than estimated billing, and the ability to access a greater level of detail on their energy usage.

This latter factor is why Gareth Kloet, head of utilities at comparison website confused.com, is in favour of smart meters.

"Once installed, they can be used to raise awareness of the amount of energy customers consume in real time and as a consequence, they traditionally lead to customers modifying their consumption habits, which in turn leads to reduced consumption," he said. "They are the modern equivalent of shouting 'turn those lights off' and are used to ensure that regular meter readings are taken and to ensure that accurate bills are sent to customers."

There are drawbacks, however. Some households switching to smart meters from monthly direct debits have reported "bill shock". While online direct debit tariffs smooth the cost out over a year, meaning the higher winter bills are spread out and not paid in one go, smart meter payments are based on exact usage during the latest billing periods.

Trisha McAuley, deputy director at Consumer Focus Scotland, said the main advantage of smart meters is that they help households manage their energy use.

"They should also end estimated and inaccurate bills which are a major source of consumer complaints. Regulator Ofgem estimates that an average consumer will save 14 a year. This saving is meant to come from reductions in energy consumption and taking advantage of lower cost off-peak tariffs."

The success of smart meters in cutting bills depends on how well consumers use the extra information and understand where they can make savings.

"We need to make sure people have the support they need to act on the display information and also do more work on who the winners and losers from time-of-use tariffs will be," said McAuley.

"As with any new technology, there are also increased risks associated with the introduction of smart meters. Good first steps have been taken by Ofgem but more needs to be done."

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Margaret Kane has declared herself a fan of smart meters after signing up with First:Utility nearly two years ago.

Margaret, of Edinburgh, happened to hear a radio story about the use of smart meters in January 2009, just as she was trying to extricate herself from a Scottish Power tariff.

"I had agreed a monthly direct debit with Scottish Power but later had a letter from them asking for another 150 because of a mistake they made. I tried to backtrack the bills but they were so complicated that I couldn't do it. I asked for the contract to be cancelled."

She contacted First:Utility straight after hearing on the radio about the firm's smart meters and had one installed in mid-2009. Because the meters do not spread payments across the year, they are not suitable for everyone, but for Margaret the appeal was the transparency - knowing how much she was using and what she was paying for.

"Paying the same each month is good but I prefer to pay for what I use so that I can budget, as I know when to expect increases and how much they will be. The bills show my usage levels and the rise or fall in my carbon footprint, so when I get the statement each month I can check when the peak periods were.

"The important thing is that I know what to expect."