A time of use (TOU) rate is a utility billing structure that charges different prices for electricity consumption during different times of day or seasons, incentivizing customers to shift consumption to lower-cost periods. TOU rates establish multiple pricing tiers based on demand periods, typically categorizing hours as off-peak, partial-peak, and peak. By reflecting the actual cost of generation at different times, TOU rates encourage energy consumption during periods when power is cheaper and grid capacity is abundant.
Rate Structures
Typical TOU schedules establish three pricing levels: off-peak rates of $0.08-0.12 per kWh during low-demand hours, partial-peak rates of $0.12-0.18 per kWh during moderate-demand periods, and peak rates of $0.18-0.35 per kWh during high-demand windows. Peak periods commonly occur 2pm-8pm on weekdays, while off-peak periods extend from 9pm-6am.
Customer Benefits
Customers reducing consumption during peak periods typically lower electricity bills by 10-25%. Flexibility in usage patterns, such as shifting dishwasher or laundry operation to off-peak hours, generates substantial savings over monthly billing cycles.
Grid Optimization
TOU rates reduce peak demand by 8-15%, support renewable energy utilization during high generation periods, and defer generation infrastructure investments by distributing consumption more evenly across daily cycles.