Multibillion-pound programme will go to all 26m homes in UK and lay the foundations for a 'smart grid' – but who will pay?

The government unveiled its vision of hi-tech homes last night with "smart" meters acting as a cornerstone of a more efficient, greener electricity grid system.

British Gas and other power suppliers have been given responsibility for installing meters in each of Britain's 26m homes by 2020, enabling them to read consumption levels remotely and end the use of estimated bills. The gadgets would also allow homeowners to monitor their own gas and electricity usage – and production if they have solar panels or wind turbines.

However, a row over the £8.5bn outlay for smart meters threatened to overshadow the announcement with critics warning that the energy companies might pocket the benefits.

The Department of Energy and Climate change (DECC) said the cost of the scheme would be dwarfed by the £14.5bn of expected savings as power companies reduce administrative costs and consumers benefit from lower bills.

Lord Hunt, the energy minister, said the international talks in Copenhagen next week on climate change underlined the importance of cutting carbon by changing lifestyles and energy usage.

A smart meter on trial earlier this year. Photograph: Christopher Thomond

"Smart meters will put power in people's hands, enabling us all to control how much energy we use, cut emissions and cut bills. Smart grids will help manage the massive shift to low carbon electricity such as wind, nuclear and clean fossil fuels," he said.

The smarter grid, outlined in a new DECC discussion document, entitled Smarter Grids: The Opportunity, sees new IT systems being used to provide much more information on demand flows and allow intermittent power, from wind, or inflexible power from nuclear, to be more easily integrated into Britain's wider electricity system.

The plans were welcomed by power companies and industry bodies. But consumer groups and energy consultants raised concerns that the smart meter rollout was being put in the hands of a sector that was already under fire for high charges and allegedly not passing on previous benefits to customers.

"We're concerned that consumers could be saddled with the entire multibillion pound bill for a project that's going to save the industry hundreds of millions of pounds a year," said Martyn Hocking, editor of Which? magazine.

Energy consultant, McKinnon and Clarke, also raised fears. "We are concerned that this is another example of smoke and mirrors by the energy industry who are clutching at straws to create a positive story, when the real scandal is that they are making a profit of approaching £200 on every home in the country," said analyst David Hunter.

But British Gas promised that savings from smart meters would be passed on to its customers and said there were good reasons for assuming that the 2% of energy-savings predicted by the government would turn out to be a major underestimate.

Petter Allison, director of smart metering at British Gas, said a company from Baltimore, in the United States, presenting at a conference in London was boasting of customers energy use was down by 20% per annum.

It further argued that the roll-out of smart meters would create 2,600 jobs in the company by 2012, including 2,100 experts in the field, 400 support staff and 100 managerial jobs.