Time of Use charges are a form of electrical energy billing association wherein the value of electrical energy modifications primarily based on the time of day. Additionally known as “TOU charges,” they make electrical energy costlier throughout “peak hours,” when there’s excessive demand, and cheaper throughout hours of low demand.
Time of use charges are meant to encourage individuals to change their electrical energy consumption to occasions when demand is low. In most locations across the nation, TOU charges are optionally available, however individuals who set up photo voltaic in California are actually required to simply accept a Time of Use billing association. The remainder of the state’s residents will finally be shifted to Time of Use someday sooner or later.
Time of Use plans can get fairly difficult and complicated, which could sound like the alternative of what you need in an electrical invoice. However there might be benefits to picking a TOU charge over a flat charge.
When you’ve got the selection between a flat or TOU plan, this text will inform you what you’ll want to find out about which choice is best for you, and how one can tailor your electrical energy use to save cash in your power payments.
Why do utility corporations use Time of Use charges?
Merely put, utility corporations like to make use of Time of Use charges as a result of they assist curb demand when a lot of individuals are utilizing electrical energy. Lowering that “peak” utilization saves the utility cash as a result of every kWh of electrical energy prices much more to make throughout peak occasions.
Right here’s why:
Utilities have a very good thought of the minimal quantity of electrical energy they should serve their clients always. That is known as “baseload energy,” and it’s actually low cost, as a result of the ability crops that make it keep operational always and keep excessive effectivity.
However energy utilization fluctuates primarily based on climate situations, temperature, and extra. The utilities “ebook” this fluctuating degree of electrical energy on a weekly and each day foundation, they usually find yourself paying a little bit extra for it than they do for baseload energy, as a result of beginning up further energy crops prices extra money.
Lastly, throughout hours of “peak” utilization, utilities have to buy further power on shorter time frames: 1 hour forward, quarter-hour forward, and even 5 minutes forward. That is the costliest form of electrical energy.
Underneath a charge construction the place each consumer pays a flat quantity for electrical energy, the utility makes much less of a revenue when a lot of individuals use electrical energy throughout peak occasions, as a result of its common price per kWh goes up whereas its income stays flat.
That’s why utilities invented Time of Use electrical energy charges.
The variations between Time of Use pricing and commonplace charges
Most individuals have a reasonably easy electrical invoice. All month lengthy, they use home equipment just like the dishwasher and garments dryer, electronics, mild bulbs, water heaters and air conditioners – all of which provides up as total kilowatt-hours (kWh) of usage.
At the end of the month, the utility company sends a bill with a simple calculation: usage multiplied by price.
For example, if you use 1,000 kWh of electricity in a month and your rate is $.15/kWh, you get a bill for $150, plus whatever flat fee your utility charges to connect to the grid—usually something like $5 or $10.
Under TOU rates, you get billed different amounts for usage at different times of day.
What is the cheapest time of day to use electricity?
The hours of the day when a lot of people are using electricity are called “peak” or “on-peak” times, and the rest are called “off-peak.” Some utility companies also add a “super off-peak” category for hours with the very least demand.
Here’s a screenshot from SDG&E’s website:
Wow, that’s a lot of numbers – and they’re used just for illustration purposes. SDG&E’s actual rates range broadly and are typically costlier than the instance above.
Mainly, the picture exhibits that up till 130% of your “baseline” allotted kWh utilization per 30 days, you’ll pay $.25.kWh for “Tremendous Off-Peak” electrical energy from midnight to six am, $.26/kWh from 6 am to 4 pm (besides in March and April, which embody a second Tremendous Off-Peak interval from 10 am to 2 pm), and $.27/kWh from 4 pm to 9 pm on weekdays. Then for those who exceed that baseline, add 7 cents to all these costs. What a multitude.
The gist of that picture although, is that it’s most cost-effective to make use of electrical energy late at evening, from midnight to six am, when most individuals are asleep. In case you can shift your clothes-washing and electrical car charging to the late-night hours, you’ll avoid wasting cash.
How Time of Use charges change with seasons
Electrical energy utilization patterns change from summer season to winter, prompting some utilities to supply totally different charges primarily based on the time of 12 months.
For instance, Southern California Edison affords the identical charge from 9pm to 4pm the subsequent day throughout the summer season, however raises the value of nighttime electrical energy within the winter. Listed here are two screenshots of the SCE web site that present the distinction:
Chances are you’ll discover that within the winter, electrical energy from 9 pm to eight am is costlier than it’s from 8 am to 4 pm. It is because individuals are inclined to warmth their houses extra within the winter once they’re at residence. On this case, it is smart to shift most of your wintertime electrical energy utilization to the hours between 8 am and 4 pm for those who can.
There are additionally modifications to Time of Use charges on holidays. As a result of most companies aren’t working, there aren’t any peak demand occasions on holidays like Memorial Day, Labor Day, Thanksgiving Day, Christmas Day and New Yr’s Day.
Is Time of Use billing value it?
What makes Time of Use billing a good suggestion? The reply is: it will depend on whether or not you as a person shopper can shift sufficient of your electrical energy to off-peak occasions.
Right here’s an instance: on the time we wrote this text, SDG&E’s precise Time of Use charges had been about $.25, $.30, and $.35/kWh for Tremendous Off-Peak, Off-Peak, and On-Peak, respectively. Their flat charge for residential clients was rather less than $.29/kWh.
Which means if a house owner used 1,000 kWh per 30 days, they’d be billed $290 on the flat charge. If as a substitute they selected Time of Use billing and used 1/3 of their power equally on every of the time durations, they’d be billed $300. With a purpose to save a pair {dollars} over the flat charge, they may shift their power utilization so about half occurred throughout the Tremendous Off-Peak pricing interval.
Looks as if a trouble, proper? It will get much more difficult when you think about the modifications in the price of electrical energy while you exceed your baseline utilization. These modifications could make TOU extra enticing, as a result of the TOU charge goes up by 7.5 cents/kWh after you exceed your baseline, whereas the flat charge goes up by 8.5 cents/kWh.
In case you’re a heavy consumer of electrical energy in comparison with different individuals in your space, a Time of Use charge might prevent extra money. The bottom line is to examine your native utility charges and estimate how a lot electrical energy you employ throughout every of the durations.
One thing that may assist with that final step is the Sense Energy Monitor (or similar), which tracks your energy consumption and can help you decide how to shift your usage or improve energy efficiency. In the near future, energy monitors like Sense will be paired with smart thermostats and energy storage to make your home’s devices automatically work together to reduce your energy costs.
Do solar panels make Time of Use cheaper?
Over the past several years, residential solar systems have popped up on roofs all over the country. Not only is clean energy a great benefit to our environment and neighbors – but it can also help save its owners lots of money.
Solar panels don’t specifically make Time of Use rates cheaper. This is because they tend to generate the most electricity during off-peak periods, when the sun is high in the sky and people are at work instead of using all the appliances in their homes.
That said, adding solar panels to a west-facing roof can benefit people on Time of Use rates, because these types of solar installations generate more energy in the late afternoon and early evening (provided they aren’t shaded by trees or other obstructions).
The solar energy generated goes directly toward reducing your consumption of the most expensive electricity, and kWh sold back to the grid during peak times are worth more if you have a good net metering agreement.
Time of Use rates and home batteries
Perhaps the smartest way to save money with Time of Use rates is to add a home battery. The battery can be charged with electricity overnight during off-peak times, then be used to power your home during peak rate times, completely eliminating your usage of the most expensive electricity.
Some utilities even have special Time of Use rate plans for battery owners, like Southern California Edison, whose “TOU PRIME” rates are just $.15 for off-peak, which is 5 cents/kWh less than their other plans’ cheapest prices.
In this example, a homeowner using 1,000 kWh per month could save as much as $50/month on electricity by adding a battery to their home, with or without solar.
Of course, combining solar panels with batteries gives you both benefits. Your solar panels make electricity far cheaper than buying it from the utility. Your batteries store the energy for later use.
You stand to save a lot of money this way.
Key takeaways
- Time of Use rates are utility billing arrangements under which electricity is more expensive during times of peak usage and less expensive during off-peak times.
- Time of Use rates reward people who can shift their energy use to off-peak times.
- The cheapest time to use electricity is during the night – after most people go to bed, and before they wake up.
- Solar panels can help save money on Time of Use rates, especially when paired with home battery storage.
- California is the first state to require homeowners to sign up for a Time of Use rate when they install solar panels.
