UPDATE 1-Duke picks Convergys to support its smart grid

* Duke has five-year, $1 billion smart grid roll-out plan

* Convergys to "aggressively" enter smart grid market (Adds details from conference call, LOS ANGELES to dateline)

NEW YORK/LOS ANGELES, Sept 15 (Reuters) - Duke Energy Corp (DUK.N) has chosen Convergys Corp (CVG.N) to help its electric and natural gas customers in five states to manage their usage better and lower their costs as part of the utility's smart grid initiative.

Duke's smart grid plan, which will cost $1 billion to roll out over five years, includes equipment, sensors and advanced meters that provide two-way communication with customers and allows Duke to bill for power usage depending on the time of day and overall demand.

Duke said on Tuesday Convergys would deliver software and support for the billing and customer relationships. The companies did not disclose the financial terms of the deal.

Duke plans to start its initial roll-out of smart meters in December in Ohio and expects to deploy 700,000 electric smart meters and 450,000 natural gas smart meters over five years.

Todd Arnold, Duke's senior vice president for smart grid and customer systems, said on a conference call with reporters that much of its smart grid program would be paid for through gas and electricity rates.

Customers would be able to manage their power usage better and lower their costs with the extra services, as the smart meters measure in as little as 15-minute increments versus current monthly readings, Arnold said.

Duke has also applied for stimulus funds through the Department of Energy, he said.