Time-of-Use Electricity Rates: How to Save $300–$600 a Year by Shifting When You Use Power

What Time-of-Use Pricing Actually Is

Most US households pay a flat electricity rate — every kilowatt-hour costs the same whether you use it at 2am or 7pm on a hot August evening. Time-of-use (TOU) pricing charges different rates depending on when during the day you consume power. The intent is economic: electricity is more expensive to produce and deliver when the whole grid is under strain, and cheaper when demand is low.

The peak hours when rates are highest vary by utility, but 4–9pm covers most of them. That's when people come home from work, turn on air conditioning, cook dinner, and watch television. During those hours, utilities are running peaker plants — typically old, expensive natural gas turbines that only operate for a few hundred hours per year precisely because the economics only work at peak demand. You're paying for that cost when you use power at 6pm.

Off-peak rates — typically 9pm to about 3pm the following day — reflect the cost of baseline generation: nuclear, large hydro, and combined-cycle gas plants that run continuously and efficiently. The difference between peak and off-peak can be substantial.

What the Rate Spread Looks Like in Real Numbers

PG&E's current TOU-C rate in California offers one of the most cited examples: off-peak runs approximately $0.28/kWh, while on-peak rates reach $0.55/kWh — nearly double. Southern California Edison's TOU rates show a similar spread. Texas utilities in the ERCOT market have TOU options from Oncor and AEP that vary significantly, with some showing peak rates of $0.40–$0.70/kWh in summer.

The typical US household consumes about 900 kWh per month, or 30 kWh per day. Without behavioral changes, roughly 40–50% of that consumption falls in peak hours — about 12–15 kWh/day. The opportunity is straightforward: shift as much of that load as possible to off-peak hours, and you pay the lower rate for electricity you would have bought anyway.

Who Has TOU Pricing Available

California is the furthest along. For customers of SCE and PG&E, TOU is the default rate plan — you're on time-of-use pricing unless you've specifically opted out. This affects millions of households.

Texas deregulated electricity market customers can often choose TOU plans from competitive retail providers. Oncor and AEP Texas offer TOU options to residential customers.

In the Northeast, utilities like National Grid, Eversource, and Con Edison all offer TOU rate options, though they're typically optional rather than mandatory. The rate spreads in New England can be significant given high baseline electricity prices.

Midwest and Southeast utilities have been slower to roll out TOU options, though the trend is toward broader availability as smart meters become universal. Check your utility's rate schedule page — look for anything labeled "Time-of-Use," "TOU," "Time-Varying Rate," or "Peak Pricing Plan."

Five Ways to Reduce Peak-Hour Consumption

1. Schedule Your Dishwasher and Laundry

A dishwasher uses 1.2–2 kWh per cycle. Running it at 10pm instead of 7pm saves $0.33–$0.54 per cycle on PG&E's rate spread. That's $120–$200 annually for a household running the dishwasher once daily. Most modern dishwashers and washing machines have built-in delay timers. Use them.

2. Shift EV Charging to Overnight

EV charging is one of the largest controllable loads in a home, typically 7–12 kW for a Level 2 charger. Charging a typical EV adds 30–60 kWh per session. At PG&E's rate spread, charging off-peak ($0.28) instead of on-peak ($0.55) saves $0.27 per kWh — that's $8–$16 per full charge session, or $1,000–$2,000 per year for a household driving an EV 15,000 miles annually.

Smart EV chargers from ChargePoint, JuiceBox, and Wallbox can be programmed to only charge during off-peak hours automatically. Set it once; forget it.

3. Pre-Cool Before Peak Hours

Air conditioning is usually the biggest summer electricity draw. A 3-ton central AC unit running at full capacity uses about 3.5 kW. Running it for 2 hours at peak rates costs $3.85 on PG&E's peak rate. The strategy: lower your thermostat to 69–70°F before 4pm, then let the home coast through the 4–9pm peak period at 74–76°F without the AC running hard. The thermal mass of the home keeps it comfortable for 2–3 hours after the AC reduces output.

A smart thermostat (Ecobee, Google Nest, or Honeywell T9) can automate this entire sequence. Set the pre-cooling schedule and peak-period temperature setback once; the thermostat handles the rest.

4. Run the Electric Water Heater on a Schedule

Standard electric water heaters (4,500W elements) consume 15–18 kWh per day. They don't need to run continuously — they maintain temperature. Adding a timer switch or a smart water heater controller that restricts operation to off-peak hours can save $200–$400 per year on its own. Heat pump water heaters with built-in TOU scheduling (Rheem ProTerra, A.O. Smith Voltex) handle this automatically.

5. Battery Storage for On-Demand Peak Avoidance

A home battery system charged during off-peak hours and discharged during peak hours eliminates peak-rate consumption almost entirely. The financial analysis is covered in the battery sizing guide (see how to size a home battery). The short version: TOU arbitrage from a $10,000 net-cost battery saves $400–$600/year, which is a 17–25 year payback on arbitrage alone. Battery storage justifies itself on backup value and solar self-consumption first; TOU arbitrage is a bonus that improves the overall ROI.

TOU Without Batteries or Solar

You don't need any special technology to benefit from TOU rates. A dishwasher timer, scheduled EV charging, and a smart thermostat can deliver $300–$500 per year in savings from behavioral and simple scheduling changes alone. That's meaningful money from free behavioral changes and $200–$500 in one-time smart device investments.

The savings compound if you already have solar panels. A solar array that produces 30 kWh on a sunny day covers most of your peak-hour consumption automatically — you're not buying power at $0.55/kWh because you're generating it yourself. In that scenario, TOU pricing is a mild negative for solar owners without storage, because utilities often apply the same TOU logic to what they pay you for net metering exports: your panels produce power during the day (off-peak), but you export at the lower off-peak rate while your consumption shifts to peak hours when you come home.

The complete optimization is solar plus battery plus TOU rate: solar charges the battery during the day (off-peak, cheap import rates or self-generation), battery discharges at 4–9pm (avoiding peak rates entirely). This is the configuration that maximizes financial return from all three components simultaneously.

Identifying Phantom Loads That Drain Money at Peak Hours

TOU pricing also makes phantom loads more expensive when they happen to draw during peak hours. A home with 50 devices drawing standby power contributes roughly 10% of monthly electricity usage from idle consumption. A plasma TV on standby at 20W running 24/7 costs about $21/year at $0.12/kWh average — more at peak rates.

Smart power strips and energy monitors help quantify phantom loads. Our guide to home energy monitoring covers specific tools and how to identify your highest-draw culprits. Identifying and eliminating phantom loads is one of the fastest payback moves in energy efficiency, and it reduces peak consumption directly.

How to Switch to a TOU Rate Plan

Check your utility's website for available rate plans. Most allow you to switch online. If TOU is already your default (PG&E, SCE customers), verify you're not accidentally on a legacy flat-rate plan. Request 12 months of your hourly usage data — most utilities offer this through their online portal or via Green Button data downloads — and model your potential savings before switching if your utility makes it easy to revert.

The one scenario where TOU makes you worse off: homes with unusual schedules where peak-hour consumption is unavoidable and very high. A home-based business running high-draw equipment from 5–8pm, or elderly residents who can't shift their routines, may pay more under TOU than flat rate. Model your specific usage data before committing.