Back to The Power Lab

How Time of Use Energy Plans Work

By Tatjana Steinhardt

Once, one company controlled all aspects of your electricity. Whether you liked it or not, you had to agree with the charges of that company and pay the bills. Those days are over, as you can now choose an electricity provider within a deregulated market and pick the best rates for yourself. You even have an option to go for the time of use energy plans. 

What is the time of use of electricity? It’s a plan that allows you to pay different rates at different times of the day. Higher rates apply when demand is high, and lower rates when the customer needs drop. But how is this beneficial, and how do you make most of it?

As an energy empowerment company, Power Wizard can help you make sense of these changes and use them to your advantage. In this article, we explain the ins and outs of time of use energy plans. 

Let us find you the best plan in seconds and start saving.


Table of Contents

What is a time of use energy plan?

How time of use electricity plans work

Benefits of time of use rate plans

Find an energy provider that offers a plan to fit your energy demand

What is a time of use energy plan?

Time-of-use energy plans adjust the electricity pay rate according to your time of electricity use. The cost of generating electricity and the electricity demand tend to change throughout the day. They are typically higher in the afternoon and lower in the middle of the night, although it depends on the season, weather, and other factors.

With the time of use electricity plans, customers get an insight into all these changes. They can better understand their expenses and learn to lower their bills by adjusting their electricity consumption to the time of lower demand. For instance, doing laundry overnight when the rates are lower is one of the ways to cut costs. 

How time of use electricity plans work

We barely scratched the surface of the time of use electricity plans. There are still important things to explore and consider with these options, such as the rate structures during the day and the seasonal rates. Here are more detailed overviews of these points to help you understand the time of use electricity plans:

Rate structures

The time-of-use-rates electricity is still a relatively new thing. Different providers offer different rate structures. Most are simple to follow, but some can get complex. 

The simplified structure includes strict but easy-to-remember timeframes for high and low energy prices. For example, electricity costs more (a peak rate) from 1 pm to 7 pm in the summer or 5 pm-8 pm and maybe a couple of hours in the morning in the winter. Shifting the electrical use to off-peak hours can bring customers a lot of savings

Some energy providers add a super off-peak rate for overnights and late mornings when people use less electricity. A few plans in Texas even offer free energy hours

Other energy providers offer actual usage pricing where you pay more whenever costs are higher and less when costs are lower. Prices can shift multiple times each day. Although it can be complex, this plan is highly beneficial for smart homes that can keep track of the changes throughout the day. For example, a smart thermostat can lower the AC when prices get high, or the computer can start charging your electric devices when prices drop. 

Higher-priced (peak) hours

As mentioned, peak electricity use tends to be in the late afternoons and evenings when energy production and consumption are highest. Most people come home from work or school during these periods, and they start using devices such as air conditioners, stoves, TVs, computers, and more.

As everyone needs electricity at once, the providers need to produce more of it. Generating power in advance or getting it from additional sources costs more, which is why electricity prices begin to increase. Energy providers also increase the prices to encourage people to use less electricity during peak hours.

With the help of the time-of-use energy plans, you can keep track of the peak hours easier and learn to avoid them, consequently lowering your bills and reducing some stress from the grid. 

Lower-cost (off-peak) hours

What is the cheapest time of day to use electricity? Late mornings and overnight. Electricity is also more affordable on weekends. 

How does this show up on your bill? You will pay less for electricity use when the demand for electricity is lower. Although the prices vary by customer type, you can expect to pay significantly less for electricity used during off-peak hours. 

Seasonal rates

Along with the peak hours, seasonal peaks in power use significantly affect the pricing. The electricity demand is the lowest during the spring and fall because of the mild weather. It grows in summer and winter as the air conditioners and heaters run continuously and excessively.

Electricity rates are usually even higher in summer than in winter. However, it’s worth considering that this can vary depending on the weather conditions in each country. 

Let us find you the best plan in seconds and start saving.

Benefits of time of use rate plans

In regulated areas, the main benefit of the time of use electricity plans comes from reduced usage. The regulated rate plans are optimized for the consumer to reduce your overall usage. The rate plans are structured to minimize the regulated utility from large capital expenditures, like new power plants. 

By creating a time of use rate that financially incentivizes customers to adjust their energy use to off-peak hours, customers can reduce their monthly expenses and even help the community do the same. 

In deregulated areas, retail electric providers optimize the time of use plans for profitability. The focus is on the free electricity and not on the total cost.

Buyer Beware

Within Texas, time of use plans are usually optimized for profitability. Time of use plans optimized for profitability will cost you more than a traditional fixed-rate plan. Please be very careful with any time of use plan that focuses on the “free” component and ignores the total cost of electricity.

If you need additional help in understanding and picking the time of use energy plans, Power Wizard is here to provide expert guidance. 

Complicated metering practice

The time of use energy plans also have drawbacks. Metering your energy usage can grow complex, depending on the chosen energy plan. Although there are solutions to this issue, it takes time to adjust to them.

For example, one of the ways to make energy metering easier is to rely on smart devices to turn on and turn off your other electrical appliances. Education is also essential. As you get more familiar with the high and off-peak metering times, you’ll remember easier to adjust your energy consumption accordingly. Over time, it will simply become a habit. 

Inconsistently in electric bills

These types of energy plans will also bring more fluctuations to your electricity bills. The charges can vary from one month to another, leaving you unable to predict the rates for the future. However, if you use the energy plan correctly, you’ll mostly see a decrease in your bills, which will make the unpredictability more bearable.

Find an energy provider that offers a plan to fit your energy demand

The time of use energy plans can cost you a lot of money in the long run. But not all programs are the same, and you may find yourself unable to decide which one to choose. 

At Power Wizard, we comb through and analyze all the power plans available to help you make most of them according to your specific needs. Whether you want full support with our full-service package or prefer to do the research and shopping yourself, Power Wizard is here to support your journey. 

Contact us today to learn more about our services and pick the best energy plan for yourself. 

Let us find you the best plan in seconds and start saving.

More From the Power Wizard Blog