Potential savings outlined already by ministers are only a fraction of the current average annual bill of more than £800 for gas and £445 for electricity.
The £28 a year figure for savings has been cited as a conservative estimate for a typical household.
But the DECC says case studies had shown people could reduce their bills by about £100 a year as the meters can encourage changes in behaviour.
"Smart meters will put the power in people's hands, enabling us all to control how much energy we use, cut emissions and cut bills," said Energy and Climate Change Minister Lord Hunt.
Energy suppliers, rather than distribution networks, will be responsible for the roll-out of the meters at a cost of about £340 per household.
They will be able to recoup the cost from customers through higher bills or upfront fees, but competition between suppliers is expected to ensure only some of the expense is passed on.
The companies stand to make big cost savings themselves, with the need for teams of meter readers becoming a thing of the past.
Martyn Hocking, from the consumers' association Which?, said: "We are concerned that consumers could be saddled with the entire multi-billion pound bill for a project that is going to save the industry hundreds of millions of pounds a year."
UK homes add £33 a year to bills by leaving appliances on standby
Every minute taken off a daily shower can shave between £5 and £10 off an annual energy bill
Lowering the room thermostat by 1% could save a householder around £65 a year
Source: Energy Saving Trust
The plans, which also confirm that each meter will include a standalone display device, were welcomed by the big energy companies.
"We are delighted the government is moving forward with its plans for the roll-out of this technology throughout Britain," said British Gas managing director Phil Bentley.
"This will be the single biggest revolution in energy use since British Gas converted all the nation's homes to natural gas in the 1970s."
Mark Daeche, of energy company First Utility, said the mass roll-out of smart meters would not begin until 2013. But from next summer, all First Utility customers who elected to have a smart meter would be supplied with one.
He welcomed the format of giving suppliers the responsibility for the supply of meters instead of a system of regional franchises.
Plans have also been announced for a smart grid to manage the flows of electricity and to increase the use of renewable energy.
In the past the National Grid has delivered electricity from large power plants to our homes. In the future the grid will need to be much smarter, according to BBC business reporter John Moylan.
"Computers will have to handle more volatile sources of electricity, such as windfarms," he said.
"They will also have to cope with micro-generation - consumers using solar panels or heat pumps to generate their own electricity and sell it back to the grid."
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.