A smart meter is an electronic device that records consumption of electric energy in intervals of an hour or less and communicates that information at least daily back to the utility for monitoring and billing. Smart meters enable two-way communication between the meter and the central system. Unlike home energy monitors, smart meters can gather data for remote reporting. Such an advanced metering infrastructure (AMI) differs from traditional automatic meter reading (AMR) in that it enables two-way communications with the meter.
　　The term Smart Meter often refers to an electricity meter, but it also may mean a device measuring natural gas or water consumption.
　　Similar meters, usually referred to as interval or time-of-use meters, have existed for years, but "Smart Meters" usually involve real-time or near real-time sensors, power outage notification, and power quality monitoring. These additional features are more than simple automated meter reading (AMR). They are similar in many respects to Advanced Metering Infrastructure (AMI) meters. Interval and time-of-use meters historically have been installed to measure commercial and industrial customers, but may not have automatic reading.
　　Research by Which?, the UK consumer group, showed that as many as one in three confuse smart meters with energy monitors, also known as in-home display monitors. The roll-out of smart meters is one strategy for energy savings. While energy suppliers in the UK could save around ￡300 million a year from their introduction, consumer benefits will depend on people actively changing their energy use. For example, time of use tariffs offering lower rates at off-peak times, and selling electricity back to the grid with net metering, may also benefit consumers.
　　The installed base of smart meters in Europe at the end of 2008 was about 39 million units, according to analyst firm Berg Insight.[9] Globally, Pike Research found that smart meter shipments were 17.4 million units for the first quarter of 2011. Visiongain has determined that the value of the global smart meter market will reach $7bn in 2012.
　　Smart meters may be part of a smart grid, but alone, they do not constitute a smart grid.
　　Since the inception of electricity deregulation and market-driven pricing throughout the world, utilities have been looking for a means to match consumption with generation. Traditional electrical and gas meters only measure total consumption, and so provide no information of when the energy was consumed at each metered site. Smart meters provide a way of measuring this site-specific information, allowing utility companies to introduce different prices for consumption based on the time of day and the season.
　　Utility companies propose that from a consumer perspective, smart metering offers potential benefits to householders. These include, a) an end to estimated bills, which are a major source of complaints for many customers b) a tool to help consumers better manage their energy purchases - stating that smart meters with a display outside their homes could provide up-to-date information on gas and electricity consumption and in doing so help people to manage their energy use and reduce their energy bills. Electricity pricing usually peaks at certain predictable times of the day and the season. In particular, if generation is constrained, prices can rise if power from other jurisdictions or more costly generation is brought online. Proponents assert that billing customers at a higher rate for peak times will encourage consumers to adjust their consumption habits to be more responsive to market prices and assert further, that regulatory and market design agencies hope these "price signals" could delay the construction of additional generation or at least the purchase of energy from higher priced sources, thereby controlling the steady and rapid increase of electricity prices.[citation needed] There are some concerns, however, that low income and vulnerable consumers may not benefit from intraday time-of-use tariffs.
　　An academic study based on existing trials showed that homeowners' electricity consumption on average is reduced by approximately 3-5%.
　　The ability to connect/disconnect service and read meter consumption remotely are major labor savings for the utility and can result in large layoffs of meter readers.