Last Updated on September 7, 2023 by Mary Pressler
Time-of-Use Electricity Plans: All You Need to Know
A time-of-use or TOU electricity plan is exactly what its name suggests: an energy plan that charges different kilowatt-hour (kWh) prices depending on the time of the day. The exact rules vary depending on your retail electric provider (REP), but most TOU plans tend to have the following features:
- You pay a higher electric rate at times when the grid has high demand, which are known as peak hours. This normally happens during the evening, when many people are returning home and switching on lights and appliances.
- You pay a lower electric rate at times when the grid has low demand, which are known as off-peak hours.
- Some TOU plans charge an intermediate rate during moderate demand hours, which is known as the shoulder rate.
Depending on your energy usage habits, a time-of-use plan can increase or decrease your power bills. If you have a high consumption during peak hours and choose a TOU plan, you can end up paying a much higher bill. On the other hand, if your consumption happens mostly during off-peak and shoulder rate schedules, a TOU plan can achieve major savings.
Understanding TOU Rates with a Simplified Example
Two homes with the same electricity consumption can end up paying very different bills under a TOU energy plan. In this example, let’s assume that both homes use 1,000 kWh per month, and they are subject to the following rates:
- 30 cents/kWh between 6:00 PM and 10:00 PM
- 10 cents/kWh at other times of the day
If Home #1 uses 60% of its energy during peak hours, but Home #2 only uses 20% of its energy during this schedule, they get the following light bills:
|Customer||On-Peak Consumption||On-Peak Energy Cost||Off-Peak Consumption||Off-Peak Energy Cost||Total Power Bill Amount|
|Home #1||600 kWh||$180||400 kWh||$40||$220|
|Home #2||200 kWh||$60||800 kWh||$80||$140|
Both homes are using 1,000 kWh/month, but home #1 pays an extra $80 due to its high consumption during peak hours. Home #1 pays an average rate of 22 cents/kWh, while home #2 only pays 14 cents/kWh (36% less). In other words, TOU electricity plans are a double-edged sword: they can increase or decrease your energy costs.
In general, TOU plans benefit homeowners who are able to reduce their power consumption during peak-rate hours. This is not an option for many consumers, since peak rates are charged exactly when the population is returning home and switching on their appliances. However, if you have the flexibility to reduce consumption in the evening, a TOU plan can save you hundreds of dollars per year.
You can also benefit from a TOU plan if you own an electric vehicle, but only if you configure your EV charger to operate during off-peak hours. Charging your EV during peak-rate hours can be very expensive!
4 Ways to Reduce Power Bills with a TOU Electricity Plan
There are several technologies that can help you reduce electricity consumption during peak hours. Here are some effective measures you can deploy:
1) Upgrade to LED lighting: LEDs use around 30-40% less energy than fluorescent lamps, and 80-90% less energy than incandescent and halogen lamps. LED lighting can lower your home consumption during the evening, exactly when peak rates are being applied.
2) Use a programmable thermostat: In most homes, the air conditioner is the device with the highest power consumption by far. If you use an electric resistance heater or heat pump in winter, it can also have a high consumption. A smart thermostat can be configured to set back your indoor temperature during peak hours, minimizing energy consumption:
- To save on air conditioning, the thermostat must increase the temperature setting.
- To save on space heating, the thermostat must decrease the temperature setting.
According to the US Department of Energy, you can save 10% of heating and cooling costs by setting back the thermostat 7-10°F, eight hours per day. Your savings can be even higher if you do this during peak-rate hours on a TOU plan.
3) Use smart home appliances: You can find a wide selection of home appliances that can be programmed from mobile apps. If you’re on a TOU plan, you can use this feature to minimize consumption during peak hours. If you have a peak rate of 30 cents/kWh and an off-peak rate of 10 cents/kWh, you save $20 for every 100 kWh shifted to the off-peak schedule.
4) Use a solar battery: If you own a solar panel system equipped with a battery bank, you can configure the battery to deliver all of its charge during peak hours. If the energy storage system is large enough to cover 100% of your evening consumption, you can avoid peak rates completely. The following are some of the most popular home batteries according to EnergySage, which are normally installed along with solar panels:
- Tesla Powerwall
- LG Chem RESU
- Enphase IQ Battery
- Generac PWRcell
- Panasonic EverVolt
- SolarEdge Home Battery
- sonnen eco
- SunPower SunVault
- Electriq Power PowerPod 2
If you are in the Oncor service territory in Texas, you can qualify for an incentive of up to $9,000 when installing a new solar panel and battery system. To be eligible, your solar array must have an installed capacity between 3 and 15 kW DC.
TOU Electricity Plans in Texas
You can now find retail electricity providers with time-of-use plans in Texas, which generally have the following features:
- Electricity providers apply different energy charges during the day.
- Transmission and distribution utilities (TDU) like Oncor and CenterPoint apply their delivery charge per kilowatt-hour regardless of the schedule.
- Some TOU plans modify their peak and off-peak schedules depending on the season, to account for changes in residential consumption patterns.
PowerShift Seasonal 12
|Energy Charge Period||Schedule||Energy Charge (Cents/kWh)|
|Off-Peak||12:00 AM – 5:59 PM and
10:00 PM – 11:59 PM
EXCLUDING: 6:00 AM – 8:59 AM on January, February and March
|On-Peak, All Year Long||6:00 PM – 9:59 PM||16.29 cents/kWh|
|Seasonal On-Peak, Only Winter Mornings||6:00 AM – 8:59 AM on January, February and March||13.06 cents/kWh|
*NOTE: TDU fees are added to the energy charge in all schedules.
As you can see, this plan has an on-peak schedule of 6:00 PM to 9:59 PM all year long, where the energy charge is three times as high. The plan also has a seasonal peak schedule that is only applied on winter mornings: 6:00 AM to 8:59 AM between January and March.