Re: If these meters were truely smart.....
"If these meters were truely smart they would automatically switched to the cheapest supplier on a second by second basis, directly paying for the electricity as I used it."
If you had automated switching it'd actually be on half hourly metering periods, because that's how the market conducts balancing and settlement. Automating switching to the cheapest tariff is conceptually simple.
But the role of suppliers is not merely sending you a bill, it is primarily contracting generation, hedging, balancing and settling energy accounts, and settling all the related systems charges, then offering that as a bundled flat rate tariff. Whilst sending the bills is the most visible activity it is also the least significant thing energy suppliers do. If the whole market is on automatic switching, then the suppliers can't contract generation ahead (because they'd go bust as soon as they found themselves out of balance, with take or pay contracts but no customers to sell to). What that means is that if you have automatic switching of tariff, then you're asking to participate in the wholesale electricity market. In theory the suppliers could operate in the spot market on customers behalf, but it's still a race to see who goes bust first, a bit like demanding that Tesco should sell to you at the price it pays wholesalers.
Lets' assume you want those peachy wholesale energy prices, that at face value look to be about half of retail electricity costs. But government need to raise about a billion quid a year to fritter on their beloved social obligations, so that'd gravitate to a new tax on energy supplied, or higher income tax. Then you've got the problem that wholesale power prices vary all day and all year round. Forward contract prices vary by a factor of three summer through to winter, and in winter you use three times as much leccy, so your December electricity bill will be around ten times your August bill (and without suppliers there's no monthly direct debit on offer). But even that variation assumes you contract your demand profile with a generator (because those are forward not spot prices). In that case if you use more than you;ve contracted in any half hour then you are "out of balance" and you would be hit for penalty payments because you want power beyond what you've contracted to buy. That means as much as 100x charges for the out of balance power, because in practical terms you're the person paying for all opex and capex on a generator that only runs for three hours a year. All of this risk and complexity is why we have electricity suppliers.
And even with that potential world of complexity and pain, as you've eliminated the supplier role, you need to rent your meter from somebody (or buy your own, and agree a service and assurance contract with somebody so that the meter can participate in the market. Oh, and lastly, unless you buy a separate hedging contract, then you're exposed to swings in wholesale energy prices over and above the normal daily and seasonal variations. You'll also need to pay feed in tariff subsidies to all the pensioners with solar PV on their bungalows.
And since you're in the wholesale market, you'll need to pay separately for electricity transmission systems costs, balancing system costs, and distribution costs. Distribution costs in particular at a bu99er, because they have a fixed charge, a maximum capacity element, unit charges that vary across three different times of day, and extra for reactive power (with so much domestic demand from CFL lighting, LED lights and displays, and refridgerant compressors you can expect to be hit for these).
You could of course contract an energy generator to do all this for you, and cut out the supplier.....except that they are then your supplier. The underlying cost structure and complexity of the industry won't change, so it'd be no different to how things are today (although worth noting that the spotty lawyers who populate OFGEM earnestly believe that integration between suppliers and generators is a problem).
So yes, it can be done, but just be careful what you wish for.