Time-of-use electricity rates are being offered by more electricity providers in plans that could help you save money. In competitive energy markets, these plans are an incentive for changing energy use habits in a way that evens out demand on the grid. If you have flexibility as to when you use the most power, time-of-use electricity plans might be an attractive option for you.
What are Time-of-Use (TOU) Rates?
Demand for electricity isn’t consistent during the day. People use more electricity when businesses are operating and when HVAC systems are running. At night, most people are sleeping, and most businesses are idle. Demand typically goes down during this time. Knowing how electricity pricing works, you will likely pay less for power during lower-demand times.
With a TOU rate plan, the price you pay for energy depends on when the energy is being used. Your rate will generally be lower during off-peak hours, such as at night and on the weekends, meaning you can reduce your electricity costs by performing your most energy-intensive tasks during these times. It may make sense to explore fixed-rate vs. variable-rate energy plans as you consider time-of-use plans.
The electricity industry generally defines on‑peak hours as 7 a.m.–11 p.m. on weekdays, with off‑peak hours running 11 p.m.–7 a.m. and all day on weekends and holidays.1
Why do Energy Companies Offer Time-of-Use Plans?
Time-of-use energy plans can provide cost transparency to customers. The wholesale market price of electricity varies throughout the day based on factors including supply, demand and weather. By offering you, as a customer, prices that differ based on time periods, retail providers give you the chance to adjust your usage to shift it to lower-priced times.
When more customers switch their usage to low-demand times, such as overnight, this can help flatten demand throughout the day, causing less stress on electrical grid infrastructure.
As of 2020, about 14 % of U.S. utilities already offer a residential TOU rate, and nearly half of investor‑owned utilities do so.2
Should You Switch to a Time-of-Use Electricity Plan?
You may wonder: Is time-of-use metering worth it? If you have the ability to choose energy providers, opting for a time-of-use plan could potentially help you save on your electric bill.
To determine whether a TOU rate plan makes sense for you, consider your energy usage needs and habits. If most of your energy-draining tasks, such as laundry and dishes, are performed at night, you could benefit from a time-of-use plan. TOU plans can also be particularly beneficial for EV owners looking to completely charge up their vehicles overnight.
In a two‑year pilot, Oklahoma Gas & Electric customers on a time‑based rate cut their peak demand by about 30 % and saved more than $150 on their summer bills.3
How to Save Money with Time-of-Use Rates
