Ofgem hopes more suppliers will offer cheaper tariffs to people using energy at off-peak times.
The regulator is asking energy companies to change the way they work out how much power households use at different times of day – and therefore how much suppliers pay for electricity.
At the moment suppliers do this using estimated information but all UK homes and businesses should be getting smart meters by 2020.
Ofgem says suppliers will be able to use more accurate information to bring in off-peak energy tariffs. Suppliers won’t be forced to do this though.
Energy customers who have Economy 7 meters can get lower prices for using energy at non-peak times – a seven hour stretch between 10pm and 8.30am – at the moment.
It looks like this will be possible on a bigger scale with smart meters.
Rachel Fletcher, Senior Partner for Markets at Ofgem said: “Smart meters will help consumers to have much more control over when they use energy. They also make it far easier for consumers to reduce their bills if they use electricity outside peak hours, or at times when electricity is cheaper to produce.
“However, to make sure consumers get these benefits, we must reform industry charging arrangements which have been in force since the 1990s. This is so that more advanced time-of-use tariffs can be brought in.”
Jeremy Cryer, energy spokesperson at Gocompare.com agreed suppliers should seize the smart metering opportunity: “We would urge all energy providers to embrace this initiative and work closely with Ofgem to bring the benefits to customers sooner rather than later.”
What’s still unclear from Ofgem is how this will fit in with new rules limiting suppliers to offering four tariffs.