How Much Money Are You Losing on Time-of-Use Electricity Rates? A 2025 Guide
- ifeoluwa Daniel
- Oct 23
- 6 min read
Most homeowners pay significantly more for electricity than necessary—often 3-4 times the off-peak rate during certain hours. The culprit? Time-of-use (TOU) electricity rates that charge different prices based on when you consume power.
If you live in California, Arizona, Texas, or Florida, understanding TOU rates could save you $150-300 every month. In this comprehensive guide, we'll explain how time-of-use rates work, show you real-world savings examples, and provide actionable strategies to reduce your electricity costs—with or without solar panels.
What Are Time-of-Use Electricity Rates?
Time-of-use rates are electricity pricing structures that vary based on the time of day you consume power. Unlike traditional flat-rate pricing, where you pay the same amount per kilowatt-hour (kWh) regardless of when you use electricity, TOU rates charge more during peak demand periods and less during off-peak hours.
The Three TOU Rate Periods
Off-Peak Hours: Late night and early morning when electricity demand is lowest. These hours typically offer the cheapest rates, often 50-75% lower than peak pricing.
Partial-Peak Hours: Mid-day periods with moderate demand and moderate pricing.
On-Peak Hours: Evening hours (typically 4-9 PM) when demand is highest. During these hours, electricity can cost 3-4 times more than off-peak rates.
Why Do Utilities Use TOU Rates?
Electricity demand peaks when most people return home from work, turn on air conditioning, cook dinner, and use multiple appliances simultaneously. This surge in demand forces utilities to activate expensive "peaker" power plants—often natural gas facilities that cost more to operate.
TOU rates were designed to encourage consumers to shift their electricity consumption to off-peak hours, reducing strain on the grid and avoiding the need for costly infrastructure upgrades
The Martinez Family Saves $131/Month
To illustrate the financial impact of TOU rates, let's examine a typical California household.
The Martinez family lives in Fresno with a monthly electricity consumption of 1,100 kWh. Before optimizing their usage patterns, 60% of their electricity consumption occurred during PG&E's peak hours (4-9 PM).
Before Optimization
Daily Usage Pattern:
Peak usage: 21 kWh × $0.64 = $13.44/day
Off-peak usage: 14 kWh × $0.15 = $2.10/day
Total daily cost: $15.54
Monthly cost: $466
After Making Three Simple Changes
The Martinez family implemented three behavioral adjustments:
Programmed their dishwasher to run at midnight using the delay-start feature
Reset their pool pump timer to operate from 10 AM-2 PM instead of 5 PM
Shifted laundry to weekends and before 3 PM on weekdays
These changes shifted 8 kWh daily from peak to off-peak hours.
New Usage Pattern:
Peak usage: 13 kWh × $0.64 = $8.32/day
Off-peak usage: 22 kWh × $0.15 = $3.30/day
Total daily cost: $11.62
Monthly cost: $349
Monthly Savings: $131 ($1,572 annually)
Importantly, the Martinez family didn't reduce their total electricity consumption—they simply shifted when they used it. This strategy requires no upfront investment and delivers immediate savings.
How to Calculate Your TOU Rate Savings
Follow this process:
Step 1: Verify Your Current Rate Plan
Log into your utility account and locate your rate schedule. Look for terms like "E-TOU," "Time-of-Use," or "Peak Pricing" on your bill. If you're not currently on a TOU plan, check your utility's website to see if one is available—many utilities have made TOU pricing mandatory for residential customers.
Step 2: Identify Your Utility's Peak Hours
Peak hours vary by utility and sometimes by season. Reference the rate table above or check your utility's website for specific timing. Mark these hours on your calendar as "expensive electricity hours."
Step 3: Track Your Peak Usage
Most utilities now provide online portals or mobile apps with hourly usage data. Access your account and review at least one week of usage patterns. Identify what percentage of your daily electricity consumption occurs during peak hours.
If your utility doesn't provide hourly data, estimate conservatively: typical homes use 50-60% of their electricity during peak hours (4-9 PM).
Step 4: Calculate Current vs. Optimized Costs
Use this formula to estimate savings:
Current Monthly Cost = (Peak kWh × Peak Rate) + (Off-Peak kWh × Off-Peak Rate)
Optimized Monthly Cost = (Reduced Peak kWh × Peak Rate) + (Increased Off-Peak kWh × Off-Peak Rate)
Monthly Savings = Current Cost - Optimized Cost
Example Calculation
Assume you use 30 kWh daily (900 kWh monthly) in California:
Current split: 18 kWh peak, 12 kWh off-peak
Current cost: (18 × $0.64) + (12 × $0.15) = $13.32/day = $400/month
If you shift 6 kWh from peak to off-peak:
New split: 12 kWh peak, 18 kWh off-peak
New cost: (12 × $0.64) + (18 × $0.15) = $10.38/day = $311/month
Monthly Savings: $89 ($1,068 annually)
Three Strategies to Maximize TOU Rate Savings
Depending on your situation and budget, you can implement one or more of these approaches to reduce your electricity costs.
Strategy 1: Behavioral Changes (No Cost, Immediate Savings)
This approach requires no financial investment—just mindful scheduling of electricity-intensive activities.
High-Impact Actions:
Dishwashers: Use the delay-start feature to run cycles after 9 PM
Laundry: Wash and dry clothes on weekends or before 4 PM on weekdays
Pool pumps: Set timers to operate during mid-day off-peak hours (10 AM-2 PM)
EV charging: Schedule charging to begin after 9 PM or 11 PM
Water heaters: If equipped with a timer, heat water during off-peak hours
Expected Savings: $80-150/month for most households
Best For: Homeowners who want immediate savings without upfront costs
Strategy 2: Solar Panel Installation (Reduces Peak Purchases)
Solar panels generate electricity during daylight hours, offsetting your daytime consumption. However, since solar production typically declines significantly by 4 PM and stops entirely after sunset, panels alone don't fully address peak-hour (4-9 PM) electricity costs.
Solar does provide substantial benefits:
Eliminates most daytime electricity purchases
Reduces overall utility bills by 40-70%
Increases home value
Provides environmental benefits
For California homeowners specifically, understanding current net metering policies is crucial, as recent changes have reduced compensation rates for excess solar production.
Expected Savings: $100-200/month (depending on system size and usage)
Best For: Homeowners with high electricity bills and suitable roof space
Strategy 3: Solar + Battery Storage (Maximum Savings)
Combining solar panels with battery storage creates the optimal solution for TOU rate structures. Here's how it works:
Daily Cycle:
Solar panels generate excess electricity during mid-day
Battery stores this excess power instead of sending it to the grid
During expensive peak hours (4-9 PM), your home uses stored battery power
You avoid purchasing electricity at peak rates
This strategy directly targets the most expensive electricity hours, delivering maximum savings.
Expected Savings: $200-300/month in high-cost areas like California
Best For: Homeowners serious about long-term energy independence and maximum ROI
Critical Consideration: Battery sizing is crucial for optimizing savings. An undersized system won't cover your peak usage, while an oversized system represents unnecessary expense. Our detailed guide on battery sizing for your home explains how to calculate the right capacity for your needs.
The Future of TOU Electricity Rates
Time-of-use pricing is expanding rapidly across the United States. A lot of American households are expected to be on TOU rate structures by 2027, up from approximately 40% in 2023.
Several trends are accelerating this shift:
1. Grid Modernization: Smart meters enable utilities to implement sophisticated pricing structures that better reflect real-time electricity costs.
2. Renewable Energy Integration: As solar and wind power constitute larger portions of the grid mix, TOU rates help balance supply and demand when renewable generation fluctuates.
3. Electric Vehicle Adoption: Rising EV ownership creates new peak demand patterns, making TOU pricing essential for grid management.
4. Climate Change: Extreme weather events increase peak electricity demand for heating and cooling, necessitating pricing mechanisms that encourage load shifting.
For homeowners, these trends underscore the importance of understanding and adapting to TOU rate structures now rather than waiting for mandatory transitions.
Schedule Your Free TOU Rate Analysis
IntegrateSun offers complimentary TOU rate analyses for homeowners in California, Arizona, Texas, and Florida. Our energy consultants will:
Review your current utility rate structure
Analyze your usage patterns
Calculate your potential savings from behavioral changes, solar, or battery storage
Design a customized solution that maximizes your ROI
