The power of Gordon Brown's energy-saving experiment involving 40,000 households cannot be underestimated as it means some homes will start getting accurate meter readings.

Contracts have been signed with energy firms EDF Energy, E.ON UK, Scottish and Southern Energy (SSE) and Scottish Power to conduct trials on 40,000 households with the help of £10m funding from the Government matched by a similar amount from the firms.

The experiment will mean 15,000 households receiving smart meters, which are designed to tell customers their energy use through linked display units or in other methods, such as through the internet. These smart meters allow energy suppliers to communicate directly with customers, removing the need for meter-readings and ensuring accurate bills with no estimates.

A further 8,000 households will receive clip on real time display units for their existing meters. Clip on real time display units can tell people how much energy they are using and how much it is costing when individual appliances are turned on. The other households will be testing new ways of receiving information to help them cut their energy use.

Business and Enterprise Secretary John Hutton said the trials are aimed at cutting household bills and responding to climate change.

'Changing consumer habits is vital if we are to cut our energy use and reduce the impact of climate change', said John Hutton.

'Smart meters provide the cutting edge technology to enable this to happen. The results of the trials will provide invaluable evidence to support the future rollout of displays and smart meters; helping to cut consumer bills and cut our carbon emissions', he added.

The trials will look at increasing the frequency of billing as well as the impact of more accurate bills. The households will be able to access information about their consumption and energy costs through visual display units that can be displayed round the house, over the internet and even through digital TV.

Ofgem Chief Executive, Alistair Buchanan, said 'Ofgem's initial work suggests that smart meters are the future, the end of the meter reader, the ability to meter homemade electricity sales back onto the grid and vastly improved consumption data available within your home. These trials, which will be administered by Ofgem over the next two years, will provide us with firm evidence and hard facts about the benefits smart meters can bring.'

Smart meters are expected to be rolled out to most households within the next ten years, and all but the smallest businesses in the next five years. In the meantime, Government has proposed that real time display units be provided with any new meters fitted from 2008, and to all households that request them between 2008-2010.

It is estimated that these measures will deliver savings of 300,000 tones of carbon per year by 2020.

'The present system isn't user-friendly as the unit system does not easily equate to pounds and pence. However there will be a need to provide equivalent metering for gas and water consumption in the same understandable units to really make a difference', said Blane Judd, chief executive of the Institute of Plumbing and Heating Engineering.