What Are Time-of-Use Rates?
Time-of-use (TOU) rates charge different prices for electricity depending on when you use it. Peak hours, typically 4 PM to 9 PM on weekdays, have the highest rates because demand on the grid is greatest. Off-peak hours, usually late night through early afternoon, have the lowest rates. Some utilities add a mid-peak tier between the two extremes.
The price difference can be substantial. California utilities charge 40 to 55 cents per kWh during peak hours versus 20 to 30 cents off-peak, a spread of 15 to 30 cents. Utilities in Arizona, Massachusetts, and several other states have similar structures with spreads of 10 to 25 cents per kWh.
How to Save on TOU Plans
The strategy is simple: shift as much electricity consumption as possible from peak to off-peak hours. Run the dishwasher after 9 PM. Do laundry overnight or before noon. Charge your electric vehicle during off-peak hours. Pre-cool your home before the peak period begins so the air conditioner runs less during expensive hours.
Smart home devices make this easier. Smart plugs can schedule appliances to run during off-peak hours automatically. Smart thermostats can pre-cool your home before peak pricing starts. EV chargers can be programmed to begin charging at the cheapest overnight hours.
Who Benefits Most From TOU
Households that can shift significant loads to off-peak hours benefit the most. If you work from home and can run appliances during the day, or if your household activity peaks in the morning rather than the evening, TOU can save you 10 to 30 percent compared to flat-rate pricing.
Solar panel owners benefit significantly because they generate power during midday (reducing daytime consumption) and can pair panels with a battery to avoid peak evening rates entirely. EV owners save substantially by charging overnight at off-peak rates rather than during expensive peak hours.
Who Should Avoid TOU
If your electricity usage is heavily concentrated during peak hours and you cannot shift it (for example, families that are home in the evening running multiple appliances), TOU may cost you more than flat-rate pricing. Before switching, request a shadow bill from your utility showing what your last 12 months of usage would have cost under the TOU plan. Most utilities offer this analysis.
The Trend Toward TOU
More utilities are moving toward TOU as the default rate structure, particularly in states with high solar penetration. As solar floods the grid with cheap midday electricity and evening demand peaks remain high, TOU pricing incentivizes consumers to align their usage with grid conditions. Understanding TOU now prepares you for a rate structure that is becoming increasingly common. Use our electricity calculator to compare TOU versus flat-rate costs for your usage pattern.