Homeowners could pay more for energy at peak times

Ministers have unveiled a £20million trial of "smart meters" - devices which give a real-time reading of the amount of power being used in a home at any one time.

They want them installed in every business within the next five years and every home within ten.

As well as giving a live reading, they are connected directly to utility companies, doing away with the need for meter readings and estimated bills. In other countries where the meters have been introduced, including Canada and Italy, firms have used them to introduce variable pricing, with higher charges at peak times such as the early evening.

The new Department for Business, Enterprise and Regulatory Reform confirmed the scheme could lead to "a range of tariffs for consumption at different times of the day".

Ministers insist smart meters are a vital weapon in the battle against climate change because they encourage people to use less energy.

Business Secretary John Hutton has announced a deal with four power companies - EDF Energy; E.ON UK; Scottish and Southern Energy; and Scottish Power - to share the costs of a trial across 15,000 homes.

The Government intends to make these available free of charge to any homeowner who requests them between 2008 and 2010.

As well as paving the way for variable charging, there is concern about who will ultimately foot the bill for the devices.

Ministers insist the cost of smart meters - previously estimated at up to £400 - is "falling rapidly" and could end up being as little as £70 to £90.

But they admit there is nothing to stop energy firms passing on the cost of installation to consumers.