Addressing the Smart Metering Forum, Baroness Verma highlighted the "real and substantial benefits" the new technology will bring to consumers. However, the programme would only be successful if consumers were given a choice about "how their data is used and by whom".
"By putting consumers in control of their energy use, smart meters enable consumers to adopt behaviour changes to improve energy efficiency and help save money on their energy bills," she said. "The security of the smart metering system is a top priority for [the Department of Energy and Climate Change] DECC."
DECC will publish new rules on data privacy, security and consumer engagement "shortly", she said.
Smart metering technology is due to be put in place from 2014. Approximately 55 million meters will be installed, covering every UK household and business, by 2019. Smart metering enables a two-way flow of information about energy consumption and demand for energy to suppliers and network operators. The Government has said smart metering will help to reduce unnecessary energy use and emissions and cut consumers' energy bills.
Baroness Verma said that the Government was taking a "secure by design" approach to ensure the ongoing security of smart metering, meaning that security concerns were being considered and addressed at "every stage" of the national programme's development.
"The principle that has informed our thinking in this area from the start is that consumers will have a choice over who has access to their smart meter data, except where the data is needed to fulfil regulated duties," she said.
This exception will give suppliers access to monthly data without customer consent, to be used for billing purposes and to fulfil statutory requirements and licence obligations. Suppliers wishing to access daily data will have to provide a "clear opportunity" for customers to opt out, and will be unable to use that data for marketing without the customer's explicit consent. If suppliers wish to access more detailed data, such as half-hourly data, they will also have to obtain explicit customer consent.
The Government has previously indicated that specific obligations for data security will be built into its conditions for granting licenses to install the technology to suppliers. An industry Code of Practice will also prevent any sales from taking place while the technology is being installed in a customer's home.
Smart metering expert Chris Martin of Pinsent Masons, the law firm behind Out-Law.com, said that data security and the protection of privacy were recognised by large suppliers and other industry stakeholders as being of fundamental importance. However, he emphasised that the controlled use of customer data was essential in order to deliver the full benefits of smart metering.
"The general consensus within the industry is that customers should be at the heart of the smart metering programme, and that it is right to treat privacy and data security seriously," he said. "However, there is a risk that if the data privacy net is drawn too tightly that this may cut across the realisation of some of the anticipated benefits of the programme. Use of customer consumption data, albeit with the knowledge of customers, will be necessary in order to deliver the energy efficiency and savings anticipated by the Government."
He added that the protections which would be set out in the new industry Code of Practice would be supplementary to those guaranteed by the Data Protection Act (DPA), which governs the processing of personal information connected to identifiable living people.
The Government plans to consult on a new smart metering Central Delivery Body, to be established and funded by suppliers. In her speech, Baroness Verma said that the new body would deliver a centralised consumer engagement programme, to support the work that suppliers will be doing themselves. The central body's work would include programmes to build consumer confidence, willingness, awareness and understanding of how to use the new technology.