Smart meter is an essential component of smart grid that measures and transmits power consumption details of customer to control center for billing and monitoring purpose. The open nature of two way communication network used in smart meter is susceptible to cyber attacks. Hence the cybersecurity gets high priority in smart meter applications. Key management system is an essential requirement of cyber security. Implementing it to dynamic, large scale smart meters by existing methods is more complex and also it is not possible to authenticate the key derived from genuine user. The emerging bio-cryptography provides solution to these problems by generating keys from user biometrics in smart meters. In this paper, an efficient key management system is proposed in which keys are derived from a bio-cryptography technique using fingerprint biometrics with Euclidean distance algorithm. The proposed technique is simulated in Matlab and its performance is evaluated. Simulation results demonstrate that the proposed technique is well suitable for data security in smart meter applications.