It is becoming increasingly popular for utilities to offer time-of-use (TOU) plans to their residential customers. In a standard electricity plan, you pay the same rate for your electricity regardless of the time of day. TOU plans are different: the cost of electricity in a TOU plan depends on the time the energy is drawn from the grid.
Under TOU rate plans, utility customers are charged more for electricity used during afternoon “peak” hours, the demand for electricity is higher. The cheapest electricity can be found during “off-peak” hours, when demand is lower.
If you have TOU rates, you can lower your electric bills by waiting for the cheapest time of day to use electricity before you run a clothes dryer, start the dishwasher, or charge your electric car. These off-peak hours are usually at nighttime but depend on your utility’s specific plan. Utilities offer TOU plans to reduce demand on the electric grid by motivating their customers to reduce electricity use during peak hours.
Many utility companies offering TOU rates allow residential customers to opt into it, but this isn’t always the case. California is the first state to require that everyone who installs a solar panel system has to switch to a TOU rate plan under their net metering 2.0 program. Time-of-use electricity pricing is a common option for commercial buildings as well, especially if tenants have flexibility in when they can use the most electricity.
Questions to ask before signing up for time-of-use electricity rates
In some cases, time-of-use plans can cost you more in the long term, but they also offer significant opportunities to save money. Before you opt into a TOU plan, ask yourself the following questions:
What are the peak hours for electricity, and how much extra will I be charged?
Peak hours will always be the most expensive time of day to use electricity. The exact hours, and the premium you pay for electricity, will vary depending on the utility company and the plan you’re opting into.
Many utility companies offer more than one time-of-use policies. These plans may have different hours classified as peak hours, or may even include some “partial-peak” hours that charge less than peak rates, but more than off-peak rates. Many rates will depend not only on the hour that you’re using electricity, but also the season. Summer rates are often higher than winter rates because of energy-intensive air conditioning systems running during hot days. You might also have a plan that has lower peak rates, or fewer peak hours, on the weekends.
Peak hours for electricity tend to be when you expect them because it’s the time of day when most people are using electricity. Generally, you can expect peak hours to start sometime in the afternoon and go into the evening, when people are returning home after a day of work and using more lights and appliances.
Every utility plan is different, so be sure to check the specifics and consider how the peak hours for electricity will impact you personally. If you’re already using most appliances in your home during the hours specified as off-peak, you could potentially save money by switching into a time-of-use electricity plan.
When can I get cheap electricity with TOU rates?
Electricity is often cheaper late at night or early in the morning, so those will be the times when you can save money on your electric bill. This is because these are typical off-peak hours when not as many people are using electricity.
Can I change my habits to use electricity during off-peak hours?
Even if you don’t currently use much electricity during off-peak hours, do you have the flexibility to change everyday habits and decrease your electricity use during peak hours? This might seem difficult for homeowners who leave the house everyday for work and return in the evening when electricity rates will be higher, but there are still steps you can take to save money using time-of-use. For example, many appliances – including dishwashers, washing machines, and dryers – have scheduling functions so that you can set the time for them to run ahead of time. If you own an electric car, you can plan to charge it at night during off-peak hours.
You can also simply wake up earlier to start household chores that require a good amount of electricity, wait to charge appliances until it’s late at night, and generally try to be more conscious of when you’re using electricity. All of these actions help to minimize your use during peak hours.
Are there other ways that switching to TOU rates will impact your bill?
It’s a good idea to compare the current rate you’re paying for electricity, including both supply and delivery, to what the rates are under a time-of-use plan. Is off-peak pricing a significantly cheaper rate than you’re paying currently? If the rates are similar, you may not save much by opting into a time-of-use plan, even if you change your behavior.
Other steps you can take to get the cheapest electricity with TOU billing
Even if you adjust your habits so that you’re using more electricity during off-peak hours, it’s unfeasible to expect that you’ll never be using electricity during the other hours of the day. There are other measures you can take to ensure that your bills are as low as possible under a time-of-use plan.
Consider installing a battery
Many homeowners are considering installing energy storage for their home not only as a source of backup power during grid outages, but also to combat time-of-use electricity rates during peak hours. With a backup battery, you can charge your battery during off-peak hours when electricity rates are at their cheapest, and then discharge and use electricity that has been stored in the battery during peak hours.
Think about going solar
Solar panels can lead to thousands of dollars in electricity savings over the course of 30 years, because you’re generating your own power instead of buying it all from your utility. If you have time-of-use rates, the credits you get for sending excess solar electricity back to the grid will depend on the time of day. If your solar panels are producing lots of electricity at peak hours, you’ll receive credits at the peak hour rate, which you can use later on. However, that also means that you’ll be credited at the lower rate for electricity you send back during off-peak hours.
In the Northern Hemisphere, while south-facing roofs are typically where solar panels will generate the highest amount of electricity, panels on western-facing roofs will generate the most during peak hours. Because of this, it’s a good idea to talk to your solar installer about the best design for your system so that you maximize your solar savings under your TOU plan.
Use EnergySage to investigate your solar options
Whether you’re considering time-of-use plans or not, going solar will help you save money on electricity. The EnergySage Solar Marketplace makes it as easy as possible to compare solar pricing from a variety of installers in your local market. Alternatively, if you want to start investigating solar with some estimates of what it may cost and save you in electricity bills overtime, check out our Solar Calculator.