Electric bills: What are time-of-use (TOU) rates and what states use them?
TOU rates are a pricing structure for electricity that varies the cost based on the time of day, day of the week, and season.
Time-of-use (TOU) rates operate on a simple principle: electricity prices vary based on when it’s used. Peak hours, typically weekday afternoons and evenings when demand is highest, come with premium prices. Conversely, off-peak hours – usually overnight and on weekends – offer the lowest rates.
The primary goal of TOU rates is to incentivise consumers to shift their electricity usage to times when power is cheaper to produce and deliver. It can help manage demand, reduce strain on the grid during peak times, and potentially decrease reliance on expensive peaker plants. For consumers, it offers the potential for lower electricity bills if they can adapt their usage patterns.
Altough often marketed as a way to incentivise usage during off-peak hours, it can be a simple penalty for usage during many hours you need it most. In general, if you are home during the day or use a large amount of air conditioning then a TOU plan might end up costing you more money.
In the UK, data suggests that the savings over a year are a meagre £5 ($8).
Which states use time-of-use rates?
According to the Federal Energy Management Program (FEMP), the majority of utility companies offer these options.
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