Understanding Time of Use (TOU) Rates: What You Need to Know

Industry insights · Mar 25, 2024

What are Time of Use Rates

Time of Use (TOU) rates are a pricing structure used by utility companies, particularly in the context of electricity billing. Under TOU rates, the price of electricity varies depending on the time of day, typically divided into peak, off-peak, and sometimes shoulder periods.

Peak Hours: These are the times of day when electricity demand is highest, often during the late afternoon and early evening when people return home from work and use major appliances. Electricity prices during peak hours are typically higher to reflect the increased strain on the grid.

Off-Peak Hours: These are times of the day when electricity demand is lowest, such as late at night or early in the morning. Prices during off-peak hours are usually lower because there is less strain on the grid and excess capacity is available.

Shoulder Periods: Sometimes, there are intermediate periods between peak and off-peak hours known as shoulder periods. Prices during these periods are typically lower than peak rates but higher than off-peak rates.

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Benefits of Time of Use Rates

Saving Money

TOU rates encourage consumers to shift their electricity usage away from peak hours towards off-peak hours. By doing so, consumers can save money on their electricity bills, and utility companies can better manage electricity demand and reduce the need for costly infrastructure upgrades to meet peak demand.

Environmentally Friendly

In addition to saving money, TOU rates can promote energy conservation and the use of renewable energy sources by incentivizing consumers to use electricity when it is most abundant and least expensive, which often aligns with times when renewable energy sources like solar or wind power are most readily available.

Implementing Time of Use Rates in Your Home

Implementing TOU rates in your home can be a strategic way to save money on electricity bills while also contributing to energy conservation efforts. Here's how you can effectively implement TOU rates.

Understand Your Utility's TOU Schedule

Contact your utility provider to understand the specific TOU schedule they offer. This will include information about peak, off-peak, and shoulder periods, as well as the corresponding rates for each period.

Track Your Energy Usage

Start tracking your energy usage patterns to identify when you consume the most electricity. You can do this by reviewing your past electricity bills or by using smart energy monitoring devices that provide real-time usage data.

Shift Energy Consumption

Once you understand your energy usage patterns and the TOU schedule, make a conscious effort to shift your energy consumption away from peak hours towards off-peak hours. This could involve:

  •          Running major appliances such as washing machines, dishwashers, and dryers during off-peak hours.
  •          Charging electric vehicles during off-peak hours.
  •          Setting timers or using smart home automation to schedule the operation of appliances during off-peak times.
  •          Using energy-saving settings on appliances and electronics to reduce overall energy consumption.

Invest in Energy-efficient Appliances

Upgrade to energy-efficient appliances and electronics that consume less electricity overall. Look for products with ENERGY STAR ratings or other energy-efficient certifications.

Utilize Renewable Energy Sources

If feasible, consider installing solar panels or other renewable energy systems to generate electricity for your home. By generating your own electricity, you can offset some of the costs associated with TOU rates, especially during peak hours when electricity prices are highest.

FranklinWH home energy management system with battery storage can perfectly fit TOU rates. It can automatically store energy generated by solar during the daytime and homeowners can use it to power their homes during peak rate hours in the evening. In this way, PV usage is optimized with more solar energy being used at home, resulting in more savings. Read FranklinWH System with TOU and Backup Functions Supports NEM 3.0 in California to know how the FranklinWH system can save energy bills in detail.

Monitor and Adjust

Continuously monitor your energy usage and adjust your habits as needed to optimize your savings under TOU rates. Keep track of any changes in the TOU schedule or rates that may occur over time.

The FranklinWH App, on smartphones, allows homeowners to monitor home energy generation and usage in real-time. By clearly knowing their home energy status, it is easier for homeowners to adjust home appliances and save more under TOU rates.

Educate Household Members

Make sure everyone in your household is aware of the TOU schedule and the importance of energy conservation. Encourage them to participate in efforts to shift energy consumption away from peak hours.

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Common Misconceptions About Time of Use Rates

Misconception 1: TOU rates are always more expensive.

One common misconception about TOU rates is that they are always more expensive than traditional flat rates. Even though TOU rates can be higher during peak hours, they are often lower during off-peak hours. This means that if you can shift your energy usage to off-peak hours, you may save money with TOU rates.

Misconception 2: TOU rates are only beneficial for businesses.

Another misconception is that TOU rates are only beneficial for businesses with high energy consumption. While it is true that businesses can often take advantage of TOU rates due to their flexible energy usage patterns, residential customers may also benefit. By adjusting their energy usage to off-peak hours, residential customers can save money on their electricity bills.

Misconception 3: TOU rates are too complicated to understand.

Some people believe that TOU rates are too complicated to understand and manage. TOU rates do require a bit more attention and planning, but they are not overly complex. Many utility companies provide tools and resources to help customers understand and manage their TOU rates effectively. With a little bit of effort, customers can easily adapt to TOU rates and take advantage of the potential savings.

The FranklinWH system allows homeowners to set the peak, off-peak, and shoulder period rates in the app. The FranklinWH energy management system will then automatically use the grid to power the house during off-peak hours and use the battery storage to power the house during peak hours. Home energy is managed automatically and home energy efficiency is optimized. As a result, energy bills are reduced.

Misconception 4: TOU rates are not worth the effort.

Some may think the potential savings from TOU rates are not worth adjusting their energy usage patterns. However, even slight changes in energy consumption during peak hours can lead to significant savings over time. By being mindful of when and how energy is used, customers can make a noticeable impact on their electricity bills.

Misconception 5: TOU rates are only available in certain areas.

TOU rates are becoming increasingly common and are offered by many utility companies. While availability may vary depending on the region, TOU rates are not limited to specific areas. It is worth checking with your local utility company to see if TOU rates are available in your area and if they could be a beneficial option for you.

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Maximizing Savings with Time of Use Rates

Maximizing savings with TOU rates requires a strategic approach to energy consumption. Here are some tips to help you make the most of TOU rates.

Understand your TOU rate structure

Familiarize yourself with the specific TOU rate structure offered by your utility company. Know the different pricing tiers and the designated peak, off-peak, and shoulder hours.

Shift energy usage to off-peak hours

Take advantage of the lower rates during off-peak hours by shifting energy-intensive activities to those times. This includes the use of major appliances, charging electric vehicles, and using heating or cooling systems.

Time your energy-intensive tasks

Plan your energy-intensive tasks, such as laundry, dishwashing, or pool pump operation, during off-peak hours, which can result in significant savings.

Optimize lighting

Switch to energy-efficient LED bulbs and consider installing timers or motion sensors to control lighting usage. This ensures that lights are only on when needed, reducing energy consumption during peak hours.

Monitor and manage energy usage

Keep track of your energy consumption patterns and identify areas where you can adjust. Many utility companies provide online tools or mobile apps that allow you to monitor your usage and track the impact of your efforts.

Consider energy storage

If your utility allows it, investing in energy storage systems, such as batteries, can help you store excess energy during off-peak hours and use it during peak hours. This can further reduce your reliance on grid electricity during expensive peak periods.

Take advantage of energy management systems

Explore smart home technologies and energy management systems that can automate energy usage based on TOU rates. These systems can optimize energy consumption and maximize savings without requiring constant manual adjustments.

As mentioned, FranklinWH energy management with battery storage has a TOU mode designed for TOU rates users. It is easy and convenient to use. More importantly, energy efficiency is increased and bills are saved with a hassle-free experience.

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Pros and Cons of Time of Use Rates

Pros of Time of Use Rates

Cost savings: TOU rates can offer potential cost savings for consumers who can shift their energy usage to off-peak hours when electricity rates are lower.

Incentivizes energy conservation: TOU rates encourage consumers to be more mindful of their energy consumption and promote energy conservation by discouraging usage during peak hours when demand is high.

Grid management: By encouraging energy usage during off-peak hours, TOU rates help balance the electricity grid's load, reducing strain during peak demand periods and potentially avoiding the need for additional power generation or infrastructure upgrades while lowering the change of grid outages due to excessive demand.

Cons of Time of Use Rates

Limited flexibility: TOU rates may not be suitable for consumers with fixed schedules or those with high energy demands during peak hours, as they may find it challenging to shift their usage to off-peak times.

Complexity: Understanding and managing TOU rates can be complex, as it requires tracking and adjusting energy usage based on different rate periods, which may be confusing for some consumers.

Potential for higher costs: If consumers are unable to shift their energy usage to off-peak hours, they may end up paying higher rates during peak periods, resulting in increased electricity costs.

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How do time of use rates vary by season?

TOU rates can vary by season depending on the specific rate structure set by the utility company. In some cases, the peak and off-peak hours may remain consistent throughout the year. However, in certain regions, the peak hours may shift during different seasons to align with changes in energy demand patterns. This typically means higher rates in summers and winters, when there is higher demand for cooling and heating. It is important to check with your utility company to understand how TOU rates vary by season in your area.

Can solar panels make time of use rates more affordable?

Yes, solar panels can make TOU rates more affordable. By generating your electricity from solar panels, you can reduce your reliance on grid electricity during peak hours when rates are higher. This allows you to offset the higher TOU rates by using the solar energy you produce during those times. Solar panels can help you save money by reducing your overall energy consumption and potentially earning credit through net metering programs.

What impact do home batteries have on time of use rates?

Home batteries can have a positive impact on TOU rates. By storing excess energy during off-peak hours when rates are lower, or from solar generation, home batteries allow you to use that stored energy during peak hours when rates are higher and when solar production does not occur. This helps to reduce your reliance on grid electricity during expensive peak periods, resulting in potential cost savings. Home batteries can also provide backup power during outages, ensuring uninterrupted electricity supply.

Are time of use rates suitable for all households?

TOU rates may not be suitable for all households. TOU rates are designed to incentivize energy usage during off-peak hours and discourage usage during peak hours when rates are higher. However, not all households have the flexibility to shift their energy consumption to off-peak times. For households with fixed schedules or high energy demands during peak hours, TOU rates may not be the most cost-effective option. Households need to assess their energy usage patterns and consider their ability to adjust their consumption before opting for TOU rates.

What is the cheapest time of day to use electricity?

The cheapest time of day to use electricity varies depending on the specific TOU rate plan offered by your utility provider. Generally, off-peak hours, which are typically late at night or early in the morning, tend to have the lowest electricity rates. However, it is important to check with your utility provider to determine the exact periods designated as off-peak and take advantage of the lowest rates during those times.

Is time of use metering worth it?

Whether TOU metering is worth it depends on individual circumstances and energy usage patterns. TOU metering can benefit those who have the flexibility to shift their energy usage to off-peak hours, as it can result in lower electricity bills. However, it may not be advantageous for those with fixed schedules or high energy demands during peak hours. You should analyze your energy consumption habits, compare the potential savings under TOU rates with your current rate plan, and consider factors such as cost, flexibility, and energy efficiency measures before deciding if TOU metering is worth it for you.

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Final Thoughts

Time of use rates can be a beneficial pricing structure for electricity consumption, offering potential cost savings and promoting energy conservation. They incentivize homeowners to shift their energy usage to off-peak hours, which helps balance the electricity grid's load and can reduce strain during peak demand periods.

However, TOU rates may not be suitable for everyone, as they require flexibility in energy usage and can be complex to understand and manage. Homeowners need to analyze their energy consumption habits, compare potential savings, and consider their lifestyle and schedule before deciding if TOU rates are the right choice for them.

The FranklinWH energy management system easily adapts to TOU rates. As a whole home energy management and battery storage system, FranklinWH helps TOU-rate customers experience energy freedom hassle-free. Get a free consultation from a FranklinWH energy expert today!

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