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What you need to know about Time-of-Use (TOU) rates

Francisco CastroApril 18, 20193060

More and more utilities are switching to Time-of-Use rates, a new billing system that is supposed to be more fair for the consumer because they take into account a number of variables, instead of simply how much power they’re using.

The California Public Utilities Commission (CPUC) explains that TOU “is a rate plan in which rates vary according to the time of day, season, and day type (weekday or weekend/holiday). Higher rates are charged during the peak demand hours and lower rates during off-peak (low) demand hours. Rates are also typically higher in summer months than in winter months.” 

Time of use pricing encourages the most efficient use of the system and can reduce the overall costs for both the utility and customers.  

If customers have energy usage that can be shifted from peak hours to off-peak hours, they may be able to reduce their energy bill by switching to a time-of-use rate plan. For example, customers could run large appliances like dishwashers and washing machines at off-peak hours. Electric vehicle owners may also benefit from switching to a time-of-use rate plan if they charge their vehicles overnight.

Think of TOU rates similar to what happens when you go to the movies. Ticket prices vary depending on the time of day you want to see the movie. Prices may be cheaper for the earlier shows when there are fewer moviegoers and higher at night when demand increases.

Electricity rates

This is different than the standard rate composed of a monthly fixed charge and a per-kWh rate for the electricity a customer uses, regardless of the time of day when he/she uses it.
According to Pacific Gas and Electric (PG&E), TOU rates help consumers save money by making the cost of energy low during the time when demand is low.

The idea is also to curb energy consumption in peak electricity-use times. 

PG&E runs three TOU rate plans. One has peak hours (highest rice) from 3 - 8 p.m. and two of them have off-peak (lowest price) hours before 4 p.m. and peak pricing (highest price) from 4 p.m. - 9 p.m. on weekdays (except most holidays).

Also, eight months (October through May) have lower prices than the four months of summer (June through September).

For its part, SCE notes that If you are able to manage your energy habits, one of our Time-Of-Use plans may be the best fit for your home. Rates on a TOU plan are based on the time of day and the season.

In October 2020, SCE will offer a TOU rate with a 5 p.m. to 8 p.m. peak period and another with a 4 p.m. to 9 p.m. peak period. There will also be an optional "TOU Prime" with a super off-peak period aimed primarily at EV owners.

“TOU plans can help you manage your energy costs. By taking advantage of lower rates during off-peak and super off-peak periods, you can avoid higher weekday rates when energy resources are in demand,” SCE says.

They recommend changing energy consumption habits, such as running washers and driers at off-peak energy times for lower rates.

Solar power to the rescue

A solar power system can help you eliminate all this confusion because when you generate electricity by the installation of solar panels on your home, you’re not dependent entirely on the utility to supply the energy your appliances and electronics need. Depending on how large of a solar system you can afford, you could skip the peak rates altogether and save on your energy bill.

However, TOU rates do impact solar system owners on net metering because the energy they sell to a utility at a certain time of the day may be lower-priced than at other periods. 

Also, while most experts recommend pointing your solar panels south for maximum energy output, under TOU rates, it’s best to face them west to improve afternoon energy production. 

Another idea for solar powered home owners is to install a battery with their solar panels. That way, you can store your excess solar electricity production at home instead of sending it to the electrical grid. Then, you can use that stored energy during peak hours when electricity prices are higher. 

If you don’t have a battery added to your solar system, you should check with the installer to see how much it will be to add one. 

California also has an incentive for storage, known as the Self-Generation Incentive Program (SGIP), that helps lower the costs of energy storage in the state. This program provides rebates to homeowners who install a battery with their solar panel system. However, if you aren’t ready to install a battery, your solar company can install a solar PV system for you now that will be ready for a battery addition at a later date.

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