The government’s smart metering programme will have more benefits for energy suppliers than for consumers, MPs on the Public Accounts Committee (PAC) have warned.

In a programme costing an estimated £11.7 billion, the government is planning to replace 53 million smart electricity and gas meters in all homes and small businesses during a five-year period from 2014.

The rollout is aimed at helping customers to control their usage by providing detailed real-time information on what their consumption is costing. It is also seen as an important step towards smart grids, which will target better management of demand.

However, today’s PAC report said that while consumers will have to pay energy suppliers for the cost of installing smart meters through their energy bills, the costs will not be transparent and the energy suppliers will be the primary beneficiaries.

“Energy suppliers will benefit significantly from smart metering, for example, through cost savings on staff associated with automated meter reading. We are sceptical that suppliers will pass on these benefits in full to consumers, given their track record and the failures of suppliers to reduce retail prices promptly when wholesale energy costs have fallen,” the MPs said in the report.

The PAC criticism follows a National Audit Office (NAO) report last June  saying that the programme faced “major risks” on value for money.

It also questioned how much energy usage would actually change, and how clearly the government had set a benefits realisation plan or a strategy for engaging customers.

The PAC report recommended that the government needs to build consumer trust by making sure that suppliers report transparently the costs and savings of smart metering, and that they share the benefits with consumers.

MPs also highlighted a risk that the smart metering system may not be able to support the development of smart grids, as planned, without incurring additional costs to upgrade the meters and the data communication system.

It warned that a data communications service required to link smart meters to suppliers would be a complex IT project that could cost as much as £3 billion.

“We expect the Department [of Energy and Climate Change] to take on board the lessons learned from other large government IT programmes and to ensure that the contracts they place are sufficiently flexible to cater for smart grids and avoid additional costs falling to consumers,” the PAC report stated.

Anthony Miller, analyst at TechMarketView, has always maintained that the government’s smart metering programme was “bonkers”, and made comparisons with the NHS’s failed National Programme for IT (NPfIT).

“Like the NPfIT, the whole premise behind the programme is fundamentally flawed. It’s not that ‘smart meters’ are a bad thing (neither are electronic patient records), of course they aren’t. But the benefits of doing a big-bang, complete national replacement are simply pie-in-the-sky. At best, energy suppliers will gain – but even that I would call into question.

“I believe we can gain virtually all the benefits of smart metering by using today’s smart technology – and I can guarantee it won’t cost us (the taxpayers) £12 billion, which on previous government IT project performance would surely just be the starting cost!”