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What Are TOU Rates for Electricity Bills?

Updated: Mar 6

what are tou rates

The average residential electricity bill in the U.S. is around $146 a month and rising. As electricity rates increase, many households are looking for ways to reduce their bills without compromising comfort. Time-of-use (TOU) rate plans from power companies help some families save on power bills, but not all. 

As a clean energy contractor, understanding how TOU rates work in your area is critical for helping your customers save on their energy bills and possibly even benefit the environment. Let’s explore what TOU rates are and how they work with solar batteries and EV charging, so you can explain them to your customers.

What are TOU rates?

TOU rates are like a flexible pricing plan for electricity. Instead of having a fixed rate for kilowatt hours (kWh) of electricity all day, time-of-use rates change based on when consumers use power. During peak times when lots of people use electricity, the rates are higher. But during off-peak hours, like late at night or in the winter, electricity rates are lower. 

TOU encourages using electricity when it's less busy, helping the electric grid manage energy more efficiently and economically. Adjusting when households use power can save money and support a more balanced and sustainable use of electricity.

When are peak times for TOU rate plans?

Peak times for time-of-use rates typically occur during periods of high electricity demand, often in the late afternoon and early evening during summer months. The exact peak hours can vary depending on the location and the specific TOU rate plan offered by the utility company. 

It's common for peak TOU rates to align with the hours when people return home from work or school and engage in various activities that increase overall electricity consumption. In particular, the use of air conditioning in the summer months causes electricity demand to spike, especially during heat waves.

When are off-peak times for TOU power rates?

Off-peak times TOU rates for electricity generally occur during periods of lower power demand. These times typically include late at night, early morning, and sometimes during the middle of the day when overall energy consumption is lower. Off-peak hours for TOU rate plans may vary depending on the location and the specific TOU rates offered by the local utility company. 

To determine the exact off-peak hours for TOU rates for your solar and EVC customers, it is recommended to check with your local utility provider or refer to the details of your specific rate plan. Taking advantage of off-peak times by scheduling energy-intensive activities can help reduce residential electricity bills.

Pros & cons of TOU rate plans

There are both advantages and disadvantages of enrollment in TOU rate plans, which often vary by household.

Pros of TOU Rates:

  • Cost Savings During Off-Peak Hours: Consumers can benefit from lower electricity rates during off-peak hours, encouraging them to shift energy-intensive activities to times when demand is lower.

  • Incentive for Energy Conservation: TOU rates promote energy conservation by discouraging high consumption during peak hours, contributing to a more balanced and efficient use of the power grid.

  • Supports Renewable Energy Integration: Aligning energy usage with peak renewable generation times can be incentivized, fostering the integration of cleaner and sustainable energy sources into the grid.

Cons of TOU Rates:

  • Adjustment Challenges: Consumers may find it challenging to shift energy consumption habits and adapt to off-peak usage patterns, potentially leading to unintentional peak-hour consumption and higher electric bills.

  • Limited Flexibility for Some: Certain households or businesses with fixed energy-intensive activities may have limited flexibility to benefit from off-peak rates, resulting in higher overall costs.

  • Complexity in Understanding Rates: TOU rate structures can be complex, making it difficult for some consumers to understand and optimize their energy usage for maximum savings.

  • Potential for Higher Bills during Peak Hours: If consumers are unable to adjust their usage patterns, they may have higher power bills.

Who saves the most by enrolling in a TOU rate plan?

Households that save money with TOU savings vary depending on individual energy usage patterns and lifestyle. However, certain groups of people tend to benefit more from TOU plans.

  • Flexible Consumers: Individuals or households with the flexibility to shift energy-intensive activities to off-peak hours can maximize their savings. This includes people who can schedule tasks like laundry, cooking, running the dishwasher, electric vehicle charging, and running appliances during times of lower electricity rates under TOU power plans.

  • Remote Workers or People That Stay at Home: People who work from home or are generally at home during the day may find it easier to adjust their energy usage to off-peak hours, taking advantage of lower TOU rates.

  • Electric Vehicle Owners: TOU plans can be advantageous for electric vehicle EV owners who can schedule their charging during off-peak times, reducing the overall cost of charging their vehicles.

  • Energy-Conscious Consumers: People who are mindful of their energy consumption and actively seek to reduce usage during peak hours are likely to save more with TOU rates.

  • Homes with Solar Panels and Battery Storage: Homes with solar panels and battery storage systems can benefit by generating and storing energy during off-peak hours, using it during peak times, and potentially selling excess energy back to the grid at higher rates.

What electric companies offer TOU billing plans?

Some power companies offer TOU rates while others don’t. Many electric utility providers, both in the United States and in other countries, offer TOU billing plans as part of their rate options. Some well-known electric companies in the United States that have implemented TOU rate plans or similar pricing structures for residential or corporate customers include:

Will my customers save money on their electricity bills with TOU rates?

TOU rates can save money on electricity bills by offering more affordable rates during off-peak hours. By shifting energy-intensive activities, such as running the dishwasher and doing laundry, to these times, your customers can capitalize on reduced power rates. However, it's crucial that they align their usage patterns with TOU periods or have a solar battery to maximize savings.

Solar Homeowners & EV Drivers Can Save With TOU Rates

Many drivers who charge their EVs at home can frequently save money with TOU rates if they can schedule charging at night when electricity rates are lowest. Many charging apps allow users to choose when the home charging station will turn on. Likewise, many solar system owners can lower their electricity bills with TOU rates, especially if they have solar batteries. This is an excellent way for solar homeowners to get more out of the solar battery investment.

Need design and engineering services for solar and EV charging station projects? GreenLancer provides standardized EVC & solar design engineering services with fast turnarounds, reliable pricing, and quality permit plan sets. Complete the submission form below to learn more. 


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