Do we really want power companies to micro-manage our electricity supplies – and charge us a premium rate for doing so?

To listen to the government and the electricity companies, the coming "smart energy" grid and smart meters in all our homes herald reduced prices, lower carbon emissions and individual consumer control of energy.

My hunch is that this is nonsense and unless we are very careful, we will see Big Brother taking over over our homes as power companies get to micro-manage our energy supply and are given complete access to information about how we live. Rather than see reductions in costs, I fear that most consumers will pay more, the most vulnerable people will be penalised and no energy will be saved at all.

Here's why the alarm bells are ringing:

1. A smart grid allows energy companies to charge infinitely variable rates according to when they provide the power. In the name of saving energy and emissions they have indicated that they plan to charge more at peak times and less at night or times of low use. The danger is that they act like the privatised train companies, charging exorbitant fares at rush hour – or when most people need power to make meals or wash up. The average consumer will have to pay far more for a reliable electrical service.

2. Studies show that smart meters with a feedback mechanism – such as a small wireless screen showing energy use – can save up to 15% off a household's energy and emissions by showing users when they are using energy needlessly and encouraging them to switch off unnecessary equipment or lights. But other research, in Scotland and Italy, suggests that after the initial novelty wears off, consumers go back to their bad old energy-wasting habits and companies start to charge whatever they can get away with.

3. People will be encouraged to programme individual appliances to switch on when power is cheaper and companies can be expected to offer lower rates in return for being allowed to turn down – or turn off – individual appliances' electricity use at times of high demand. This will benefit the educated and the techno-savvy, but pensioners, the ill and the vulnerable in society may be baffled and therefore penalised.

4. Power companies will be able to telleveryone's energy-use habits precisely, to the point of knowing which appliances they use, when people are in or out of a house, how efficient their boilers are and what they cook. This data is commercially valuable and it can be expectedthat it would be sold to other companies. The regulator will have to decide who owns the data and whether companies have the right to turn off appliances. Fears that data on energy consumption could be misused by criminals, police or insurance companies have slowed the compulsory introduction of smart meters in Holland.

5. The gains are likely to be made by the rich who can afford to generate their own electricity, or who can buy the most energy-efficient technology. Everyone else will have to become fluent in the art of micromanaging their energy use. This is likely to be beyond the old, the poor and people confused by technology.

6. The large energy companies have a bad record in pushing up prices whenever possible and many have lost the trust of consumers. Many have been found to overcharge, missell, and make misleading statements about green tariffs. The likelihood is that the smart grid will make things more complex. Only last week, the regulator, Ofgem, ordered the power companies to reform their pricing and to stop confusing customers who, they said, were were being "bamboozled" with more than 300 different energy tariffs.

7. If electricity companies are allowed to vary the price that they charge their customers by the hour, how much more difficult will it be to challenge them or ensure they are acting fairly? In the US, where smart meters have been installed in some towns, there has been a rash of accusations of unfair practices.