Time-of-Use Rates Explained: Are They Right for You?

Time-of-Use Rates Explained: Are They Right for You?

Time-of-use (TOU) rates charge different prices for electricity depending on when you use it. During "peak" hours, you pay more. During "off-peak" hours, you pay less. How much you pay depends heavily on where you live — electricity rates vary widely by state.

The idea is simple: shift your usage to off-peak times and save money. But the reality is more complicated.

How TOU Rates Work

A typical TOU rate structure looks like this:

| Time Period | Hours | Rate |

|-------------|-------|------|

| Off-Peak | 9 PM - 4 PM | $0.08/kWh |

| Peak | 4 PM - 9 PM | $0.25/kWh |

In this example, electricity costs 3x more during peak hours than off-peak.

Some utilities add a third tier:

| Time Period | Hours | Rate |

|-------------|-------|------|

| Off-Peak | 9 PM - 7 AM | $0.07/kWh |

| Mid-Peak | 7 AM - 4 PM, 9 PM - 11 PM | $0.12/kWh |

| Peak | 4 PM - 9 PM | $0.28/kWh |

Why Utilities Offer TOU Rates

Utilities face a problem: everyone wants electricity at the same time (late afternoon/early evening), but generating capacity is expensive to build and maintain.

TOU rates incentivize customers to shift usage away from peak times, reducing the need for expensive "peaker" plants that only run a few hours per day.

Who Benefits from TOU Rates

TOU rates work well if you:

• Work outside the home during peak hours (4-9 PM)
• Can run major appliances (dishwasher, laundry, EV charging) at night
• Have solar panels (you export during the day, import at night)
• Have a programmable thermostat and can pre-cool/pre-heat your home

TOU rates don't work well if you:

• Work from home during peak hours
• Have children home in the afternoon
• Can't shift when you run appliances
• Have medical equipment that runs continuously

The Math: When TOU Saves Money

Let's compare a flat rate vs. TOU for two different households:

Household A: Away during peak hours

• Total usage: 1,000 kWh/month
• Peak usage: 200 kWh (20%)
• Off-peak usage: 800 kWh (80%)

Flat rate ($0.12/kWh): $120/month

TOU rate: (200 × $0.25) + (800 × $0.08) = $50 + $64 = $114/month

Savings: $6/month

Household B: Home during peak hours

• Total usage: 1,000 kWh/month
• Peak usage: 500 kWh (50%)
• Off-peak usage: 500 kWh (50%)

Flat rate ($0.12/kWh): $120/month

TOU rate: (500 × $0.25) + (500 × $0.08) = $125 + $40 = $165/month

Extra cost: $45/month

The difference is dramatic. Household A saves money; Household B pays 38% more.

How to Evaluate TOU for Your Situation

Step 1: Get your hourly usage data

Most utilities with smart meters provide hourly usage data online. Download at least 3 months of data.

Step 2: Calculate your peak vs. off-peak split

Add up your usage during peak hours vs. off-peak hours. What percentage falls in each bucket?

Step 3: Do the math

Apply your utility's TOU rates to your actual usage pattern. Compare to your current flat or tiered rate.

Step 4: Consider behavior changes

Could you shift usage? Running the dishwasher at 9 PM instead of 7 PM, charging your EV overnight, doing laundry on weekends—these changes can tip the balance.

Common TOU Mistakes

Mistake 1: Switching without analyzing your usage

Don't assume TOU will save you money. Do the math first.

Mistake 2: Forgetting about weekends and holidays

Most TOU plans have lower rates on weekends and holidays. Factor this into your calculation.

Mistake 3: Ignoring seasonal rate changes

Some TOU plans have different peak hours and rates in summer vs. winter. Check both.

Mistake 4: Not adjusting behavior

TOU only saves money if you actually shift usage. If you switch but don't change habits, you'll likely pay more.

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We Can Tell You If TOU Makes Sense

When you upload your bill, we analyze your usage pattern and calculate whether a different rate plan—including TOU—would save you money. No guesswork required. Here's how the process works.

See how your bill compares across rate plans → · View pricing