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A watchdog has said it will keep a close eye on energy companies over personal data held on smart meters.

The devices, which show exactly how much gas and electricity is being used in a household, could contain a raft of private information.

Every home in Britain is expected to be equipped with a smart meter by 2020 and the Information Commissioner's Office warned privacy must not be compromised.

The industry said that it was addressing security concerns.

The new coalition government has said that it is committed to the roll-out of smart meters.

Under the plans, each home would get a new smart gas meter and a new electricity meter. One is the "host" meter, that will communicate with the customer and the supplier.

This should bring an end to estimated bills, because the technology sends back an accurate meter reading to the energy company every day.

However, various security concerns have been raised regarding the technology. This includes the amount of personal data held on the devices.

It also means that it could make clear the exact times householders tend to leave their home, or when they sleep, by looking at their energy usage.

Energy company First Utility recently announced a link-up with Google, that would allow people to check their energy usage via the internet and mobile phone.

First Utility boss Mark Daeche said that data was encrypted, but that the government needed to ensure standards of privacy were set.

He said there should be "no loopholes" and that information should be "secure and anonymous".

The Information Commissioner's Office (ICO), which monitors personal data security, said that it had already met major suppliers to discuss the security implications of smart meters.

"We will continue to maintain a close dialogue to ensure that their introduction does not compromise customers' privacy. Important issues include what information is stored on the meters themselves, in particular whether information identifying the householder will be held," an ICO spokesman said.

"In any event energy companies will clearly need to hold records linking meters with householders and all the information must be held in line with the requirements of the Data Protection Act. The industry recognises the need to address these matters properly."

Christine McGourty, the director of Energy UK, which represents the big energy suppliers, said: "The industry is well aware of the potential security concerns that smart meters present.

"Their customers' security is a key priority and every effort is being made to ensure that any security issues have been identified and resolved before the mass roll out of smart meters begins. All information will be handled strictly in accordance with the Data Protection Act."

More information is also expected soon on the functionality of smart meters.

First Utility's Mr Daeche argued that there should be no requirement for a screen on each smart meter that displays how much energy has been used. He said many people would access this information on their mobiles.

The big energy companies have said that they will offer the option of a digital display unit on every smart meter.

Meters will still have to be checked on occasions by energy company staff.