Pacific Gas & Electric said Monday it will replace 1,600 SmartMeters due to a "rare defect" that causes the wireless meters to run fast and inflate customers' electric bills.

It's the first time PG&E has acknowledged experiencing any kind of technical problems with the meters, which have drawn consumer complaints of being inaccurate and causing negative health effects. The 1,600 defective meters, which are manufactured by the Swiss company Landis+Gyr, comprise less than 0.1 percent of the nearly 2.1 million Landis+Gyr meters installed in Northern California to date.

PG&E began calling customers who have the defective meters Monday and will offer full refunds to customers who received inaccurate bills. The utility said the average refund is $40 per customer.

"In a nutshell, Landis+Gyr sent us a small number of meters with a defect that causes them to run fast when they operate at high temperatures, and they may miscalculate energy bills," Greg Kiraly, PG&E's vice president for SmartMeter operations, said Monday.

The 1,600 faulty meters are spread throughout PG&E's service area and are not clustered in a specific location. PG&E and Landis+Gyr said the defective meters sent signals that they were not working properly -- much like the "check engine" light of a car. The two companies said they worked closely to solve the problem, and feel confident it is isolated to the 1,600 meters they have identified.

"We're not happy to have even one defect, because our goal is to be defect-free," said Jerry Figurilli, chief operating officer of Landis+Gyr. "This is a very small number of meters. I would not expect that it will occur again."

Some of PG&E's SmartMeters are made by GE, which also has about 2 million meters installed by PG&E in Northern California.

Utilities across the country and world are installing digital wireless meters that use embedded software to record electricity use by the hour. Advocates say those meters will give consumers greater understanding of and control over their energy usage.

But PG&E's rocky SmartMeter rollout has been a public relations disaster for the utility. PG&E customers in Bakersfield and elsewhere complained that the new meters caused their bills to skyrocket; others have complained that the meters' wireless signals cause headaches and nausea.

So many consumers complained about high bills that regulators with the California Public Utilities Commission ordered an independent investigation into meter accuracy. The report, released last fall, found no accuracy problems with the SmartMeters and noted that high bills could be traced to other causes, such as increased energy use during a summer heat wave or "load changes" like adding a pool or additional room to a house.

Consumer advocates with The Utility Reform Network said PG&E's revelation of 1,600 defective meters should be a wake-up call to the company and regulators to take customer complaints more seriously.

"Customer complaints about SmartMeter accuracy continue to pour into TURN," said Executive Director Mark Toney. "The meters themselves alerted PG&E to the fact they weren't running properly."

All 1,600 defective SmartMeters will be replaced. In addition to the rebates because of overbilling, affected customers will get an additional $25 credit on their bill for "customer inconvenience," as well as a free home energy audit.