Monday’s announcement by the UK government for smart meters for every home is heavy on ‘empowering consumers’ with real-time knowledge of our energy use and therefore helping us reduce our consumption. But we shouldn’t assume that this is the real reason why the UK is pushing ahead with the compulsory replacement of all meters.

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The principal value of intelligent meters lies in their ability to help electricity suppliers manage demand – downward and upward. When the grid has a surplus, the energy suppliers want us to buy more, and will offer us lower prices to recharge our electric cars or run the washing machine. The little meter on the wall will flash invitingly low prices for our power.

On the other hand, when supply is scarce, perhaps because the wind has dropped unexpectedly, the energy companies will want to charge more for their power. Smart meters will allow flexible tariffs, but will also enable power-hungry appliances such as fridges to be temporarily turned off when power is expensive.

As you might expect, the government doesn’t tell us this in its announcements and chooses to pretend that smart meters are all about customers saving money. In fact, smart meters are an entirely necessary way of getting us to adjust our power consumption in line with the availability of supply. As the UK gradually increases the amount of electricity coming from unreliable or variable sources, smart meters can assist in managing national electricity demand. It is a little disingenuous of government to suggest otherwise.

The estimated cost of the decade-long programme to install 50m meters is put at £7bn – nearly £300 a home. Only time will tell whether this is a reasonable figure. Places like Italy have done it for less so perhaps it is churlish to be sceptical.

But buried deep within the documents released by the Department for Energy and Climate Change (Decc) is an estimate that installation cost for a new meter is £29. That’s the cost of arranging the appointment, arriving at the house, and swapping the old meter for the new device. It seems an impossibly low figure. My guess is that the costs will escalate to a level far higher than the government optimistically envisages.

You will seek also unsuccessfully in Monday’s announcements for any statement of who is going to pay for the new meters or of the identity of the central body which will collect all the information on our electricity and gas use. The answer to who pays is, of course, you, the householder. Once again, compare this with Italy. There the monopoly supplier paid for the 30m meters, saying it recouped the cost within four years in lower costs of meter reading and fraud. Here, the big six electricity companies are going to be allowed to pass on the full costs of smart meters to the consumer. No wonder they welcomed the government’s move so enthusiastically – they charge us to save them money.

The move to smart meters is an important part of shifting to a low-carbon economy. And it will rid of the tedious ritual of ringing up to correct the estimated meter reading of our electricity and gas companies. For thrifty and numerate consumers, it will eventually save money. We now need to focus on reducing the costs of the roll-out and ensuring that the energy companies pay their fair share of this national investment programme.

This article was originally published in the Guardian on Monday 11 May 2009.