Time of Use Electricity Rates Explained
Key Takeaways
Across the United States, many energy providers are offering customers more choices in how they pay for electricity. These options can include fixed rates, variable rates, or time-based pricing structures that change throughout the day, giving you more flexibility and potential ways to save.
In this guide, we’ll explain what Time-of-Use (TOU) electricity rates are, how they work, and how understanding them can help you make informed decisions about your energy usage and monthly bill.
- TOU electricity rates are a billing plan where the price of electricity changes depending on the time of day.
- Electricity costs more during “on-peak” hours when demand is highest, often in the late afternoon and early evening. Exact hours may vary by season and utility.
- Power costs less during “off-peak” hours, which often include overnight hours, weekends and some holidays, depending on the utility and plan.
- To save money on a TOU plan, you’ll often want to shift high-energy activities, like running laundry, dishwashers or charging an EV, to off-peak periods.
- Understanding your utility’s specific TOU schedule and pricing is the first and most important step toward lowering your bill.
Next, we’ll take a closer look at how TOU pricing works and why some people choose TOU rates over traditional flat-rate electricity plans.
Time Of Use (TOU): A New Way to Pay for Power
For many years, most households paid the same electricity price no matter when they used power. While that traditional flat-rate structure is still available in many areas, utilities across the United States are increasingly offering additional rate options, including TOU plans, to give customers more flexibility and choice in how their energy is priced.
TOU electricity rates are designed to reflect how demand for electricity changes throughout the day. When more people are using power at the same time, electricity costs more. When demand is lower, electricity costs less. TOU plans make those differences visible, allowing customers to adjust their energy use based on when power is most affordable.
One way to think about TOU rates is to compare them to pricing you may already be familiar with. For example, ride-sharing services, like Uber or Lyft, often cost more during busy times, and airline tickets are typically more expensive when demand is high. Electricity works similarly under a TOU plan: the price changes based on when demand is higher or lower, rather than staying the same all day long.
By knowing when electricity costs more or less, you can make informed choices about how and when you use energy throughout the day.
What are TOU or Time of Use Electricity Rates?
TOU electricity rates are a pricing structure where the cost of electricity, measured in kilowatt-hours (kWh), varies depending on the time of day it’s used. Instead of paying the same price for every unit of electricity, a TOU plan assigns different prices to different time periods.
Under a TOU plan, each day is divided into specific time blocks. Each block has its own price per kWh, based on overall electricity demand during that period. When demand is higher, the price per kWh is higher. When demand is lower, the price per kWh is lower.
These time blocks are decided by your utility and can vary based on location, season and rate plan. Understanding how these periods are structured is key to knowing when electricity costs more and when it costs less.
Understanding the Tiers of Time of Use Electricity Rates
TOU electricity plans divide the day into pricing periods, often called “tiers,” based on when electricity demand is higher or lower. Each tier has a different price per kilowatt-hour (kWh). While the names of these tiers are fairly consistent, the exact times and prices can vary by utility, location, season and rate plan.
That’s why it’s important to review your local utility’s specific TOU schedule before choosing or using a TOU plan (EPB customers can find information about TOU scheduling and rates here).
With that in mind, here’s a typical breakdown of the most common TOU tiers:
1. On-Peak (Highest Rate)
On-peak hours are times of the day when electricity demand is highest and prices are at their peak. This usually happens when many people are home and using appliances, lighting and heating or cooling systems at the same time.
Typical example of on-peak hours:
- Late afternoon or early evening (for example: 3:00 p.m. to 7:00 p.m.) on weekdays in the warmer months.
- Early morning (for example: 6:00 a.m. to 10:00 a.m.) on weekdays during the cooler months.
Electricity used during these hours is generally priced higher because overall demand on the grid is higher.
2. Off-Peak (Lowest Rate)
Off-peak hours are periods of lower demand, when fewer people are using high-power appliances or systems. Because demand is lower, electricity prices are typically lower as well.
Typical example of off-peak hours:
- Off-peak hours may include overnight and early morning outside the on-peak windows.
- Off-peak also may extend to all day on weekends and designated holidays, as defined by your utility.
This can make overnight charging or running big appliances especially cost-effective on TOU plans.
3. Mid-Peak / Partial-Peak (Moderate Rate)
Some TOU plans also include a mid-peak or partial-peak tier, which sits between on-peak and off-peak pricing. These periods are often referred to as “shoulder hours,” or times when demand is moderate — not quite as high as peak but not as low as off-peak.
Not all TOU plans include a mid-peak tier, but where they do, these hours are usually found just before or after the on-peak window and can offer a moderate price point for energy use.
The specific hours for each tier can differ significantly between utilities and rate plans. Some plans may use different definitions entirely. That’s why it’s important to look at your local utility’s TOU schedule to know exactly when on-peak, off-peak and any mid-peak hours occur before making decisions about your energy use.
Why Are Utility Companies Introducing TOU Rate Plans?
TOU rate plans are one of several options utilities may offer to help manage electricity demand more efficiently while giving customers additional choices for how they use and pay for power. These plans are designed to support the electric system as a whole while also accommodating different lifestyles, schedules, and energy needs.
- They help support grid stability during high demand.
Electricity demand naturally rises and falls throughout the day. During peak hours, when many people are using power at the same time, the electrical grid experiences its highest levels of strain.
TOU rates encourage customers who are able to shift some of their energy use away from these high-demand periods. When demand is more balanced across the day, utilities can reduce stress on the grid, improve reliability, and limit the need to build additional power plants that are only used during short peak periods.
- They help maximize the benefits of renewable energy.
TOU plans can also support the integration of renewable energy sources like solar power. Solar energy production is highest during daylight hours, which may not always line up with traditional peak demand times.
Shifting electricity use to times when renewable generation is abundant can help the grid use more clean energy and operate more efficiently, according to the U.S. Department of Energy (DOE). In some regions, this can result in lower-priced periods during the day, creating opportunities to use electricity when the grid is operating more efficiently and with a lower environmental impact.
- They help support different lifestyles and energy needs.
Everyone’s energy usage is different and no two households use electricity the same exact way. Some people work overnight shifts, some charge electric vehicles at home, and others may be home during the day and away in the evenings.
Offering multiple rate plan options, including TOU plans, allows utilities to better reflect these differences. Customers who can shift their energy use to lower-demand periods may find TOU plans to be a good fit, while others may prefer a different rate structure. The goal is to provide flexibility so customers can choose the option that best aligns with their daily routines and energy needs.
Determining Whether a TOU Plan Will Help You Save
TOU plans can help some households save on energy costs, but only if your daily routine makes it realistic to move a meaningful chunk of your electricity use into lower-cost hours. According to the DOE, customers can benefit from time-variable pricing if they strategically shift their energy usage.
Who can save on a TOU plan?
If any of the following is true for your household, you may be a good candidate for a TOU plan:
- People who can reliably run high-energy chores outside the on-peak window on weekdays.
- Households that charge an EV at home and can schedule charging for overnight or other off-peak hours.
- Anyone with large, schedulable loads like a pool pump, dehumidifier or workshop equipment that can run during lower-cost hours.
Who should avoid a TOU plan?
For many customers, a fixed-rate plan may be easier to budget and more predictable, especially if your household can’t shift its energy usage. Talk to your utility provider before switching to a TOU plan if the following is true for your household:
- Households where most energy use happens during on-peak hours because that’s when everyone is home.
- People who can’t shift cooking, laundry or HVAC use due to work schedules, caregiving or health needs.
- Anyone who would find it stressful to “watch the clock” to avoid higher-cost periods.
Find out when your household uses the most electricity.
Before you do any math, look at your real-life usage patterns. You can use your utility’s tracking tools to spot patterns in when you use the most energy (EPB customers can use the free MyEPB app).
Pay special attention to how much energy you use during higher-cost windows, like weekday mornings or late afternoons, depending on the plan and season.
1. Identify your “shiftable” energy use.
TOU plans work best when you have flexible loads you can move to cheaper hours. Here are some examples of energy usage that are easier to schedule for off-peak times:
- “Set it and forget it” chores: Washing laundry, drying laundry, running the dishwasher or dehydrating food overnight.
- Big energy users that can be automated: Charging your EV, operating your pool pump (or scheduling it to run automatically).
- Computer tasks that take a while: Rendering video or audio, defragmenting your hard drives or scanning for viruses.
2. Do a quick “break-even” estimate.
A simple way to decide if TOU will help you save is to first estimate how much energy you can realistically move out of the expensive hours. Then compare how much you’d be charged for the same amount of usage on different rate plan options.
Talk to your utility provider before you switch.
Picking a plan is easier when you can see your actual usage patterns. Some variable rate plans can cost more if your energy use doesn’t line up with the plan’s cost-effective hours, so it’s important to talk to an energy expert before you’re locked into a more expensive rate.
If you’re an EPB customer and you’re considering switching to a new rate plan, our EPB Energy ProsSM are here to help you find all the ways to save. Schedule a free 30-minute phone call or live chat session here.
How to Save Money with TOU Electricity Rates
Saving money on a TOU plan isn’t about using less electricity overall — it’s about using electricity at lower-cost times whenever possible. Even shifting a few high-energy activities out of on-peak hours can make a noticeable difference over time.
Follow the checklist below to get the most value from the electricity you use on a TOU electricity rate plan.
1. Run major appliances during off-peak hours.
Some of the biggest energy users in your home can often be run on a timer or delayed start, making them easier to move into off-peak periods.
- Dishwashers
- Clothes washers
- Electric clothes dryers
Running these appliances late at night, early in the morning or on weekends can help reduce how much electricity you use during higher-cost on-peak hours.
2. Pre-cool or pre-heat your home.
Heating and cooling are often the largest contributors to a household’s energy use, especially during extremely hot or cold weather.
If your plan includes higher on-peak rates:
- Cool or heat your home during lower-cost hours just before on-peak pricing begins.
- Raise or lower your thermostat a few degrees during the on-peak window to maintain comfort using that pre-conditioned air.
This approach can help limit how hard your HVAC system works when electricity is most expensive.
3. Charge your electric vehicle overnight.
Charging an electric vehicle can use a significant amount of electricity, making timing especially important.
- Whenever possible, charge your EV during overnight or other off-peak hours.
- Most EV chargers and vehicles include built-in scheduling features that allow charging to start automatically during the lowest-cost period. Using these features can help you take full advantage of off-peak pricing without changing your routine.
4. Use smart home technology to automate your savings.
Smart home tools can make TOU plans much easier to manage, since they allow you to program or schedule tasks for specified times.
- Smart thermostats can be programmed to adjust temperatures automatically based on your TOU schedule.
- Smart plugs or timers can schedule devices like water heaters, pool pumps or dehumidifiers to run during off-peak hours.
Automation helps reduce the need to “watch the clock” while still capturing savings.
5. Schedule pool pumps to run off-peak.
If you have a swimming pool on your property, your pool pump may be using a significant amount of electricity, especially during warmer months.
- Run your pool pump during off-peak hours whenever possible, such as overnight or early morning.
- Use your pool pump’s built-in timers or plug it into a smart plug or automation system.
Shifting pool pump operation away from on-peak hours can help reduce your TOU electricity costs while still meeting your pool’s circulation needs — just be sure to follow your pool professional or manufacturer guidance.
Is a TOU Rate Plan Right for You?
TOU electricity rates can be a helpful option for some households, but they aren’t a universal solution. Whether a TOU plan works for you depends largely on how flexible your daily energy use can be.
Households that can shift a meaningful portion of their electricity use into lower-cost hours are more likely to see savings, while those with less flexibility may find a fixed-rate plan easier and more predictable.
It’s also important to remember that rate plans are about balance, not just cost. While TOU plans reward flexibility, a single flat rate can offer peace of mind and simplicity. For example, EPB’s Base Rate Plan provides one consistent price that’s designed to be convenient and affordable. With a flat rate, you don’t have to plan activities around cost-effective hours — you can use energy when you need it.
Before choosing a rate plan, take a close look at your daily routines and when your household uses the most electricity. Using your utility’s energy tracking tools can help you see how your usage lines up with different rate options and estimate whether a TOU plan would be a financial benefit.
If you’re considering a specialized TOU plan, it’s especially important to feel confident that it fits your lifestyle. Some TOU rate plans require a one-year commitment and may cost more if your energy use doesn’t align with the plan’s lowest-cost hours.
If you’re an EPB customer and you’re unsure which option makes the most sense for your household, our EPB Energy ProsSM are here to help review your usage patterns, answer your questions and help you choose a plan that gives you the best opportunity to save. Schedule a free consultation.
Choosing the right rate plan is about taking an active role in how you manage your energy costs and finding what works best for your home, schedule and comfort.
