The National Grid is paying households money for using less electricity as it tries to ensure the country has a good supply of energy as the cold snap bites.

After warnings for months that the UK could face power cuts and scheduled outages during times of high demand this winter, the National Grid is now putting some of its contingency plans into action.

Alongside putting three UK coal plants on standby to help increase supplies if needed, the grid's Demand Flexibility Service has been activated as temperatures drop and demand for energy rises.

The scheme financially rewards homes with a smart meter who can cut their usage in peak times and here's how it works.

What is the Demand Flexibility Service?

Designed by the National Grid, the Demand Flexibility Service involves energy users being offered a financial incentive to either cut-down or turn off their energy consumption at key times during the day or evening to subsequently reduce the demand for energy across the system.

It has been developed to give ESO, the electricity system operator for Great Britain, access to additional flexibility it can call on when the need for energy is at its highest such as in extremely cold weather like parts of the country are currently experiencing.

Why is it needed?

Since the autumn there have been fears the UK could face its first planned power cuts since the 1970s if energy supplies were to run low this winter.

The potential for a full-blown international power supply crisis is unlikely, says the government, but planners have been preparing for numerous worst-case scenarios should rising energy prices and squeezed supplies in Europe leave the UK struggling to supply homes and businesses.

When did the scheme start?

The scheme was first announced last October and officially came into play from November 1. It is expected to run until the end of March when the weather will warm up and so demand for extra energy will then be less.

How does it work?

People who agree to switch their energy off at peak times, or use appliances during specified off-peak hours, will essentially be paid money for placing less pressure on the National Grid.

That money is most likely to be given to them as credit on their energy bills, rather like the Energy Bills Discount scheme, but could also be sent as cash paid directly into their bank account.

What are the peak and off peak times?

Off peak times are when demand for energy is at its lowest and it is during peak times that officials are most concerned that demand for gas and electricity this winter could outstrip supply.

Off-peak hours tend to be between 10pm and 8am each day, while it has been reported that the peak time ESO would like to see energy usage cut back - in the event of very high demand on the grid - is roughly between 4pm and 7pm when people are coming in from work and school, heating their homes, cooking meals and taking showers.

It is avoiding these times, when using appliances such as washing machines, tumble dryers and dishwashers, that could see households make money. The scheme's first live run in Monday evening requested that people cut back between 5pm and 6pm. On Tuesday this is expected to be extended to between 4.30pm and 6pm.

Who has been eligible to join?

Households with smart metres, which relay regular energy consumption readings to suppliers, are ideal candidates and the National Grid has spent a number of months encouraging domestic customers to seek-out any off-peak saving schemes with their suppliers as they have become available or are publicised.

Homes are expected to be paid just over £3 for every unit of energy they're able to save during the specified hours when the National Grid would like to see some customers use less.

Twenty-six gas and electric suppliers have currently joined the scheme, including British Gas, EoN, Octopus Energy and EDF, and hundreds of thousands of their customers who have an existing smart meter have subsequently signed up to potentially take part.