It comes after official figures showed almost 4m smart meters were not working correctly, leading to them being billed incorrectly.
There are now 32.9m smart meters in UK homes overall, according to government figures.
The consultation marks the latest step in efforts by ministers to roll out time of use tariffs more widely, which rely on suppliers being able to access the half-hourly data that smart meters collect.
Besides cost savings, the moves have also been supported by the National Grid as a way of helping to manage supply and demand by more efficiently using smart technologies.
Efficiencies achieved through smart technologies could save £50bn in grid costs by 2050, the Government said, reducing the need for more electricity pylons.
DESNZ claimed a greater use of smart systems would also create 10,000 jobs and increase UK GDP by up to £1.3bn by 2050, with thousands more jobs potentially in the offing if a successful export industry grows as well.
Relatively few people are currently on time of use tariffs but major suppliers such as Octopus have introduced consumers to a similar concept in recent years as part of the National Grid’s “demand flexibility service”.
This has seen consumers paid incentives in exchange for cutting their electricity usage at certain times when supplies are tight, helping to keep the lights on during winter.
Sarah Honan, head of policy at the association for decentralised energy said: “Public participation in our energy system is not a ‘nice to have’ but an absolute imperative to reach net zero in a cost-effective and secure manner.
“This marks another important step towards unlocking the value of demand flexibility through smart-as-standard devices and competitive customer offerings from a range of service providers.”
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