Smart meters will automatically send energy suppliers half-hourly updates on their customers' gas and electricity use, under an overhaul of the system later this year.
Ofgem will be granted new powers in May allowing it to change the way smart meters operate, so that data about usage is sent to suppliers every 30 minutes by default.
Suppliers will be able to use the data to change consumer energy prices as much as 48 times per day, allowing them to charge households more at peak times. The idea is that it will ease demand during busy periods and eventually lower kWh costs for everyone.
The new initiative will mark another step closer to "time of use" tariffs, which would charge customers different amounts at peak and off peak times.
For example, using a washing machine in the day or watching television in the morning would be cheaper, based on when National Grid usage is down, while charging gadgets at popular times such as overnight could be more expensive.
But it's been met with criticism with campaigners warning that people who have no control of their usage could be left paying higher premiums.
This includes vulnerable people and those with older tech devices.
Ofgem insisted the plans will ultimately benefit most customers, saving households up to a collective £4.5billion overall.
That's if households use it to their advantage by turning their electricials on at off peak times.
A timeline published by Ofgem says it will formally gain the powers to introduce the changes in May. They will be implemented by 2025.
Smart meters already have the capability to send half-hourly use reports to suppliers, but at present a customer must "opt in" for this to happen.
But soon this will be in place by default. Customers who do not want to share this data will have to ask to "opt out" - but the change won't apply until the bill payer next signs an energy contract.
Households with a smart meter will also have to submit a mandatory reading every day, rather than once a month under the current requirements.
At present, suppliers typically do not know exactly how much power households are using throughout the day.
This means companies generally charge a flat rate for electricity and gas, although some including Octopus and British Gas have offered "free" power to customers during quieter hours.
Ofgem and energy companies want to encourage people to use less power during the busiest periods. This would mean less investment is needed for upgrading grid infrastructure with rising use such as with the increased use of electric vehicles.
Greg Jackson, chief executive of Octopus Energy, said: "This change would be extremely good for consumers.
"People who want a bargain can grab them, while everyone else benefits because it reduces waste."
A spokesman for Ofgem said: "This major system upgrade is a significant milestone on Britain's path to net zero.
"It will enable a more efficient, flexible and greener energy system which will save billions of pounds per year on all consumers' energy bills.
"Ofgem will work closely with industry to make sure it delivers this major upgrade while ensuring those in vulnerable circumstances remain protected."
