Understanding Your Energy Bill: Time-of-Use Rates 101

Time-of-use rates. TOU rates. The name sounds familiar. You may have heard of them. If you’re a customer of San Diego Gas and Electric, you are likely on one right now. But what the heck are they? More importantly, how will they impact your bill? Let’s break it down. Sit in a comfy chair, grab a drink, and let’s spend some time with time-of-use rates.

Your utility is bidding farewell to flat electricity pricing

If you’ve ever looked at your electricity bill, you’ve likely noticed that your utility company charges you the same amount for each unit of electricity that you use, regardless of when you use it. The power you use in the morning to get ready for work costs you the same as the power you use overnight to cool your home. 

Until now, most electricity providers in California (and across the United States) have charged a flat, per kilowatt hour (kWh) rate for the amount of energy each customer consumes during the billing cycle. This rate was supposed to flatten out the peaks and valleys of daily and seasonal price fluctuations and make consumer bills more predictable. It also reflected the relatively little diversity in the type of fuel that was used to generate your electricity—the fuel sources powering your hairdryer in the morning, mostly natural gas and large hydro, were likely similar to those running your slow-cooker at night. In the days before the proliferation of clean energy like wind and solar on a large scale, the supply of power was quite homogeneous. So, generally averaging the cost of producing electricity in the morning and night (and throughout the rest of the day) was sensible and gave the consumer a flat and predictable per-kWh price tag for their power.

In California, the electricity system has changed dramatically over the last decade, and the rationale for continuing to rely on flat pricing no longer holds. The introduction of renewable energy on a massive scale has substantially altered both the major sources of power and cost of producing this power throughout the day. For example, abundant solar and wind energy floods the grid in the middle of the day, sometimes providing as much as two-thirds of all the power consumed in the state in any given hour. This electricity is not only cleaner than traditional fossil-fuel power, it’s also cheaper to generate—a double win. 

But here’s the problem: most of us are not using much power in the middle of the day, the very time when electricity is clean and cheap. Instead, demand for electricity soars in the evening, when everyone begins their post-work routines and our largest source of clean power, the sun, begins to set. The power plants that come in to take its place are typically more expensive to operate. They also tend to be dirtier because they burn fossil fuels to produce electricity.

So, here’s the dilemma in a nutshell: All of us are not using electricity when it’s green and low-cost. Instead, we’re using it when it’s dirtier and more expensive. And that means we’re not helping our collective climate and clean energy goals.

Enter: Time-of-use rates.

TOU Rates: The Basics

In an effort to better align the actual cost of producing electricity at the time us customers are using it with the price we’re actually paying for it — and encourage those of us who are able to shift use of power-hungry appliances to times of day when power is cheaper and cleaner—all three of California’s large utilities (Pacific Gas & Electric, San Diego Gas & Electric and Southern California Edison) are rolling out TOU rates for their customers. 

TOU rates, just as the name suggests, are rates that change depending on when a customer uses electricity. Although specific rate plans will vary depending on your utility, all rates will typically have a “peak” period (a block of time when electricity is expensive), and an “off-peak” period (a block of time when it’s cheaper). Check out the PG&E, SCE, and SDG&E TOU pages for specific rate information. Generally, power will be cheaper to use during the day, more expensive in the evening hours, and cheap again overnight. It’ll generally also be cheaper on the weekends than during the week.

Importantly, once rolled out, these rates will be mandatory. You will not be able to opt out of them to go back to the old flat rate. If you’re an SDG&E customer, you are likely already on the TOU rate plan. The utility moved everyone over to TOU earlier this year. Although PG&E and SCE have not yet made their rates mandatory, customers can opt-in to them voluntarily. Eventually, every customer of all three utilities will be moved to these rates*.

So, TOU rates are coming your way (if they haven’t arrived already) and it’s important to get to know the specific plans that your utility offers. Once you know, you can begin planning how to make the most of the TOU rates.

How do I benefit from TOU?

Although moving to TOU rates is a big change for many Californians, many of us can benefit (hint, lower our bills!) if we’re able to shift when we use electricity. A few examples of how you can do this are below, although we know not everyone may be in a position to do everything on the list. Just remember, every little bit helps to introduce more and more cheap and green power sources into our grid… and lowers your bill!

Take advantage of TOU:

• Set the thermostat to precool your apartment a few hours before you arrive home from work, then turn it up for an hour or two in the evening. (We know, this goes against everything we’ve been taught about heating or cooling an empty home.)
• Run the dishwasher before bed … or set a delayed start to run a few hours after you’ve left for work.
• Bust out that slow-cooker and set it to run during the day. Not only will your meal be cooked with cleaner energy, you’ll also have dinner ready by the time you get home.
• Do the laundry on the weekends. Weekend rates will almost always be lower than the evening hours Monday through Friday.
  

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Will TOU rates affect OhmHours?

No. Moving to a TOU rate will not affect your participation in OhmConnect or the frequency with which you receive OhmHours. 

BUT, as a general rule, your #OhmHour will very likely fall within the block of time when your electricity rate is highest. (Remember: high prices = high demand for electricity and less clean power on the grid. Since the main goal of an OhmHour is to reduce demand when the grid needs it most, it makes sense that #OhmHours will typically occur during high-price periods.) This means that saving energy during the #OhmHour will be even more important. Not only will you be able to earn money from OhmConnect if you use less power than your baseline, you’ll also save money on your electricity bill by not using power during the time when it’s most expensive. 

That’s a lot of information. What should I remember?

Here are a few key takeaways:

• The two cheapest times to use electricity will be midday and overnight. Solar power is highest during the day, while the wind blows more fiercely at night. Take advantage of the cheaper and greener power by shifting as much of your energy use as possible to these hours of the day. ‍
• Your power will almost always be more expensive in the late afternoon through the evening. Remember, when you come home after a day of work and turn on the oven and crank the AC, many others are likely to be doing the same. Demand for power is high and fossil fuel power plants are being turned on to meet the rise in the demand. 
• If we’ve scheduled an #OhmHour, your power is likely expensive. Reduce your energy use to earn and save money. Your wallet will thank you.

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* Note that, if you’re a Community Choice Aggregator (CCA) customer, you will not be subject to these rates. CCAs are maintaining flat electricity pricing for the time being.