Electricity bills will stay higher for longer as regulator Ofgem delays smart meter reforms that could save households more than £200million a year.

The changes would mean energy firms have to tally up bills every half an hour for all homes with smart meters. This is currently optional.

Ofgem hopes the move would save households up to £4.5billion by 2045, or around £214million a year on average.

However, the regulator has now delayed the process for the fourth time, by six-and-a-half months, in order to carry out more tests.

The delay will see the obligatory 'market-wide half-hourly settlement' (MHHS) programme kick off in late September 2025, rather than the original date of early March next year, though energy firms will not all move over to the new system at the same time.

In an energy context 'settle' means an energy firm tallying up how much power a customer has used versus the amount it costs, not the more common meaning of paying off a bill in full.

The point of MHHS is to even up the prices that energy firms and consumers pay for electricity.

At the moment, the price that energy firms pay for electricity from providers changes every half an hour. 

But that rapid change is not always passed on to consumers, as many energy firms apply less frequent bill updates. Some energy tariffs already use half-hourly settlement, however. 

Most households are paying energy bills limited by the Ofgem price cap, currently £1,717 a year for average energy use. The price cap will rise by 1.2 per cent to £1,738 on 1 January 2025.

It means the typical home will pay an extra £21 a year for energy, until the price cap is reset again in April 2025.

A statement from Ofgem said: 'Ofgem is extremely disappointed that such a significant delay has proved to be necessary.

'MHHS remains a high priority for Ofgem and government as a means of enabling the lowest-cost decarbonisation of the energy sector. 

'MHHS participants must comply with the revised MHHS implementation timetable and ensure the earliest possible delivery of MHHS-related benefits to consumers.'

Ofgem said there would be no further delays to the reforms.

How will half-hourly settlement save me money?

The main saving will come from households and businesses moving to different tariffs, Ofgem hopes, including 'time of use' energy deals.

These are tariffs where the price paid for energy varies, with cheaper rates at off peak periods, typically overnight. An example is an Economy 7 tariff.

These are uncommon compared to standard energy deals, where the price paid does not vary according to the time.

A further saving could come from energy firms becoming more efficient as a result of half-hourly settlement.

For example, once more homes have smart meters then energy companies can more accurately predict the demand for electricity at certain times.

That means they can more efficiently 'balance the grid' by turning power stations on and off to meet this demand.