Derek Allen: With a little wisdom, new meters really will be a smart move

AS CONSUMERS, there are limited ways in which we can influence the price we pay for energy. We can seek to switch our electricity and gas suppliers, we can move to different tariffs, buy our energy over the internet and switch off unnecessary lights, heating, etc.

Underlying all these activities is the fact that the cost of electricity and gas has risen considerably in response to the cost of fuel, the dynamics of supply and demand, and the funding of Green initiatives.

Social issues, such as fuel poverty, have been exacerbated by this increase in energy costs. Generally, the price of energy does not depend on personal income and the less well-off in society tend to be the ones who are hardest hit by energy price increases.

Pensioners and others on low or fixed incomes, energy costs and Scotland's northern latitude are not an easy mix. Smart meters may be able to help the consumer dampen that combustible mix of factors.

What has made that dusty meter in the hall cupboard suddenly "smart"?

The new meter will become a shiny bright, two-way communication device with your electricity supplier. It will enable a supplier to assess power and gas usage at any time of the day. It can track consumption patterns. It can confirm what we all know, that demand is highest when we get up in the morning, when we return home in the evening, or when we go to bed.

A lot has been pinned by the government on changing that dusty meter, ranging from more use of new and renewable energy sources, to home micro-generation and electric vehicles. A big ask for any piece of technology.

Smart metering can help to provide a more intelligent customer-power company relationship. Estimated bills should go. No meter readers. Tariffs for power and gas will start to match consumer demand patterns. For example, if power companies need to reduce demand, you can select to be "cut off" at certain times if that means cheaper energy at other times when you need it, eg cooking your supper.

Industry has already been using so-called "interruptible tariffs" for gas. These arrangements allowed National Grid to manage this cold winter's gas supply.

So smart meters present a brighter future to consumers. Or do they? All new technology has its price and some of the hiccups can be quite unexpected. In the Netherlands, the roll-out of smart metering has been halted by objections to "the spy in the hall".

In a country that values individual rights and liberties, the smart meter has been seen as an invasive method of state control and observation. Anyone viewing demand consumptions can track who will be in and out of a particular house at a particular time – information that could be useful to people other than power companies.

Data privacy is an area where smart meters will need to be very smart.

Smart meters will have the power to disconnect electricity customers. Against the background of fuel poverty and rising power costs, the prospect of easier disconnection will need to be managed carefully. And pensioners not using power because of a fear of the financial consequences should not be a behaviour that is fostered by smart meters.

The underlying aspect of smart metering that is potentially so useful is its move towards a smarter grid. In Ottawa, Canada, they are rolling out a smarter grid network that will allow power companies to reduce waste and emissions, offer cheaper tariffs to customers and run their grid more pro-actively.

Scotland can move closer to that target.

• Derek Allen is a partner and head of the energy and utilities group at Shepherd & Wedderburn LLP