What is the Demand Flexibility Service and is it any good?

Energy suppliers across the UK have begun trialling scheme that incentivise customers to cut their electricity usage at peak times. Known as Demand Flexibility Service (DFS) events, these are headed up by the National Grid Electricity System Operator (NGESO).

DFS events typically occur during the winter period, when energy usage is at its highest for the country. However, at least one supplier – Octopus Energy – has turned these events into a year-round scheme, offering additional ‘freebies’ to its customers for agreeing to take part.

But even though you may be offered certain incentives for taking part, it doesn’t necessarily mean that you are on the best deal for your energy.

What is the ESO?

Operating under the National Grid group, and also recognised under the acronym NGESO, the ESO is the Electricity System Operator for Great Britain. It’s role is to move electricity around the system to ensure that homes and businesses are kept supplied with the energy they need, 24 hours a day 7 days a week.

Energy regulator Ofgem states that the ESO has “an important role to play in the UK’s transition to a decarbonised, decentralised, and digitalised energy system.”

As part of this framework, the ESO holds Demand Flexibility Service (DFS) events as a means to push customers toward reducing their electricity use at peak times.

For now, DFS events are 100% opt-in, but in the future, they may be something that is forced on all energy customers.

What is the Demand Flexibility Service (DFS)?

The Demand Flexibility Service (DFS) was first introduced by the National Grid Electricity System Operator (NGESO) in autumn 2022 in response to heightened concern about the security of electricity supply across Great Britain, following the Russia-Ukraine conflict.

The DFS aims to incentivise homes and businesses across England, Scotland, and Wales, to adjust and reduce their electricity consumption during periods where there is a high demand placed on the electricity grid.

To achieve this, participating energy suppliers and third-party apps are paid by the NGESO and pass on a percentage of these payments (up to 100%) to customers who opt-in to these voluntary events.

How much can participants earn from DFS events?

According to a report from the Centre of Sustainable Energy, the majority of people who took part in DFS events throughout 2023 only saved between £1 and £5.

This is because how much you earn will depend on how much electricity you typically use during peak times, and how much you are able to reduce this usage by.

You’ll only really stand to save a meaningful amount if you tend to use a lot of energy at peak times, for example, doing a load of washing, charging an electric vehicle (EV), or turning on electric heating. However, if you live alone and use gas for space and water heating, you savings will likely be negligible.

The figures in the table below are based on energy providers who take part in DFS events and pass on the full amount (100%) of savings received from the NGESO to their customer base.

It is important to note that each participating supplier decides the percentage of savings they pass on, so the actual amount you’ll get could be much lower than what is listed below.

Aside from my home's energy usage, what else will affect how much I can earn?

Aside from your energy usage, there are some other factors to consider with how much you can earn with DFS schemes. They are: -

1.            The amount paid by the ESO for each event can vary. For example, in 2023, the ESO paid energy suppliers and third-party providers at least £3 per kWh (kilowatt hour) of electricity saved, but this can change as events are expected to become more frequent and as participation increases.

2.            Energy suppliers and third-party operators choose how much of the ESO payment they want to pass on to customers. Some companies may choose to withhold a percentage of savings from its customers. According to Centre of Sustainable Energy, the average percentage that is passed on is 75%.

3.            How many events are held will affect how much you can earn. Various external factors can affect when and how often events will take place. These include, how much pressure is on the grid at any time, supply issues, and the weather.

Do all suppliers offer cashback on your bills for taking part in events?

No. Instead of applying a direct cashback amount on your energy bills proportionate to the amount saved, Octopus Energy gives participating customers points which can be “cashed in” for money back on bill or swapped for merchandise and day trips. Octopus calls this its OctoPlus scheme.

What is the OctoPlus scheme?

OctoPlus is a rewards scheme announced by Octopus Energy in October 2023 and officially launched in February 2024.

Through the scheme, customers can earn points (known as “OctoPoints”) by taking part in Saving Sessions (DFS events) and undertaking certain tasks (such as referring a friend to Octopus Energy).

Accrued points can then be exchanged for a credit on your account or be spent in other ways, such as a National Trust Day pass.

How do OctoPlus Saving Sessions work?

Customers taking part in Saving Sessions – Octopus Energy’s term for a DFS event – will earn ‘OctoPoints’, rather than direct money back on their electricity bill.

The majority of Saving Sessions occur during peak periods (usually between 4pm and 7pm on weekdays) with the aim being for customers to cut back as much as possible on their energy usage.

During the session, Octopus tracks each participating household’s usage at half-hourly intervals, comparing it against their typical usage during that same time. Customers that use less energy will be awarded OctoPoints, with more points given the more energy that is saved.

Octopus estimates customers taking part will earn an average of 800 – 1,000 points per session (equivalent to 1-£1.25).

Octopus is also trialling “surprise” sessions. These sessions have a shorter notification period (as little as a few hours) with no reminder sent but come with the added incentive that customers may earn more points than they would during a standard session.

Why is Octopus Energy awarding points instead of straight cash off of your bills?

Instead of providing straight cashback on energy bills, Octopus prefers to pay out its customers who participate in saving sessions, reward points. It is also one of the few suppliers paying the least amount of its NEGSO allowance – only 75%, or £2.25 p/kWh saved.

Octopus tries to counter this by saying that customers signed up to its OctoPlus scheme will receive a free weekly coffee from either Caffe Nero or Greggs, as well as weekly 2 for £10 cinema tickets. However, may exaggerate the savings, as there is a cap on the number of coffee and cinema tickets that can be redeemed, meaning some customers will inevitably miss out. Additionally, with this type of rewards setup, customers may feel obligated to say with Octopus to receive “freebies”, thinking they are saving money each week when in fact, they may stand to save more by ensuring they were on the best possible energy deal to suit their needs.

Also, by offering this type of points scheme – including randomised moments where additional points can be earned – such as by spinning a ‘Wheel of Fortune’ -  is less transparent than cash rewards, continually dangling a metaphorical carrot that one could earn up to £1,000 off of their energy bill by remaining a customer and taking part in these in-app games.

However, those who frequent Octopus' official subreddit often complained that taking part in the game was often met with error messages and that on the occasions it did work, they did not receive any more than 1p worth of points.

What are some things to consider before taking part in the OctoPlus scheme or any DFS event with a supplier?

Although Saving Session events may seem like an easy way to save a few pounds off the cost of your electricity bill, there are some disadvantages to consider.

Energy suppliers are under pressure to convert all its customers to smart meters

The UK government first aimed to have every household in Great Britain fitted with a smart meter by the end of 2019. However, the most recent report from the Department for Energy Security and Net Zero released on June 14 2023, shows that only 57% of this target has been reached. The target has also now shifted from having 100% of all domestic households to 80% being fitted with a smart meter by the end of 2025.

And, if suppliers do not meet annual smart meter installation targets, they will be fined. For example, a report released in 2023 found that six suppliers (British Gas, OVO, Bulb,  E.ON, Scottish Power, and SSE) were fined a combined total of £10.8m in 2022 for missing smart meter installation targets by almost 1.03 million.

To make matters worse for suppliers, during the first three months of 2024, only around 780,000 smart and advanced meters had been installed in the UK. This was the lowest number of installations recorded since Q2 2016.

To be eligible for any DFS event, regardless of supplier, customers must have a smart meter installed.

Some customers – especially those who are considered vulnerable – may feel pressured into having a smart meter fitted under the misguided belief that they will save a lot of money off of the cost of their energy bills through DFS events.

However, these same customers are also at higher risk of falling into energy debt, and, once a smart meter is installed, risk having their meter switched remotely to prepayment, effectively cutting off their energy supply.

Prior to the introduction of smart meters, energy suppliers chasing customers who failed to pay their bills could secure a warrant to enter a property and ‘force-fit’ a prepayment meter. But with a smart meter, the supplier can now switch customers from credit to prepayment remotely.

Customers an feel pressured to drastically reduce their energy supply when the savings are not there

Looking at the OctoPlus scheme from Octopus, the average amount saved from any one of their Saving Sessions is only around 800 points (£1). But many customers – especially those who are vulnerable or low use – may feel pressured to take extreme measures to save more energy, when in reality, the savings are not there.

For example, one user on the Octopus subreddit commented that during a saving session, they switched off all lights and electronics in their home for the entirety of the session. They were then left disappointed when they discovered they had saved less than £1, even after taking such extreme actions.

Some suppliers are witholding passing on savings to customers

All suppliers will receive a payment from the ESO for running DFS events. However, some, like Octopus Energy, pass on 75% or less of these savings to the customer, meaning that a select number of suppliers are benefitting disproportionately more than the customer who is cutting back on their energy.

Existing Octopus Energy customers may resist switching suppliers believing OctoPlus is giving them savings greater than they actually are

Through the OctoPlus scheme with Octopus Energy, rather than receive a set amount off the cost of your bill for taking part in their ‘Saving Sessions’ (DFS events), you will accrue points.

Each kilowatt (kWh) of savings made through a session is valued at £2.25 (1800 points), but the average number of points Octopus customers earn per session is only 800 (£1).

Octopus also attempts to retain its customers through the OctoPlus scheme by offering incentives to earn more points, including:-

• Signing up to Octopus Energy as a new customer with a smart meter and paying by direct debit (or having a smart prepayment meter) : 500 points (62.5p)
• Switching a friend to Octopus via their referral scheme: 800 points (£1)
• Referring a friend for solar panel installation: 80,000 (£100)
• Spinning the ‘Wheel of Fortune’, an in-app game where you spin the wheel to earn between 8 and 800,000 points (1p - £1,000).

However, many customers have complained that the in-app wheel of fortune game frequently quits unexpectedly, and on the occasion it does work, only awards the bare minimum in savings – 8 points (1p).

OctoPlus Saving Sessions only truly benefit high-energy users

Unless you use a lot of energy during peak times, Saving Sessions don’t really stand to benefit you. The amount of energy you save is only compared against the energy you’ve during the same period of time over the last 10 days.

For example, if you work late at the office and return home after the peak period has already ended, you won’t save anything. Likewise, if you have a family with a set routine (e.g., you do a load of washing, cook and eat dinner between 5-7pm etc.), adjusting your entire schedule just to save a few pence potentially is not worth it.

Loyal customers who do not want a smart meter are punished

Any customers who may not want a smart meter installed but are loyal to their supplier, may feel slighted by not being offered savings on offer through DFS events.

Customers who are on a strict budget may also feel pressured into taking on a smart meter in the hopes of making significant savings on their energy bills.

So, should I switch to Octopus Energy just for their rewards scheme?

No. Even if Octopus Energy is offering certain incentives or rewards, it should not be a driving factor if you do ultimately decide to switch to Octopus. This is applicable for any supplier you’re considering switching to and any rewards they may offer by taking part in DFS events.

Regardless of whether you are a high or low-end energy user, the way to save the most on the cost of your energy bills is to sign up to a fixed-rate energy deal that offers a cheaper unit rate and standing charge than what you are currently paying.