Last reviewed: 2026-08-17 (UTC)
A time-of-use electricity plan can lower the price of the same kilowatt-hour in one part of the day and raise it in another. The hard part is deciding whether your household's usage, the complete tariff, and the enrollment terms produce a lower annual bill. We use a data-first method: calculate the break-even peak share, price a full year of interval usage, then account for any EV, heat pump, solar, or battery.
Time-of-use electricity plans: the short answer
A time-of-use, or TOU, plan assigns preset electricity prices to preset time blocks. Off-peak electricity costs less, on-peak electricity costs more, and some plans add mid-peak, super off-peak, seasonal, weekend, or critical-event prices.
A TOU plan is a strong candidate when:
- Your existing on-peak share is below the plan's break-even point, or a realistic future load shape gets it there.
- The lower off-peak price applies to enough kWh to offset the higher peak price.
- Savings remain after fixed fees, delivery charges, tiers, credits, meter costs, and solar export treatment.
- The commitment period and switch-back rules leave an acceptable downside if the estimate is wrong.
An evening-heavy household can pay more even when the off-peak rate looks compelling. A home that already uses most electricity outside the peak window may save without changing its total consumption.
Across U.S. studies of several time-based rate designs, a 2025 meta-analysis estimated an average 16% reduction in peak demand per participant, falling to 12% among the highest-quality studies. Average on-peak energy use fell about 3% in summer and 1% in winter, with wide uncertainty. The meta-analysis shows that households respond to time-based prices, while the size of that response varies too much to substitute for your own bill calculation.
Know which rate structure you are comparing
TOU prices follow a schedule published in advance. That separates them from hourly market prices and from demand charges based on the home's highest burst of power.
| Rate structure | What sets the charge | Main decision risk |
|---|---|---|
| Flat or standard energy rate | The same per-kWh rate across the day | Flexible usage receives no cheaper period |
| Time-of-use rate | Preset peak, off-peak, and sometimes mid-peak blocks | Too much usage lands in the expensive block |
| Free nights or weekends | A TOU variant with a zero energy charge in named hours | Paid-period prices and other recurring charges can erase the headline benefit |
| Critical peak pricing | High prices during a limited number of called events | A few hard-to-avoid events can be costly |
| Real-time or hourly pricing | A price that changes hourly or more often | Weather and market spikes can move the bill quickly |
| Demand charge | The highest kW draw during a billing interval | One short overlap of large loads can set the month's charge |
The FERC rate glossary defines TOU prices as varying across periods that usually last longer than an hour, while real-time prices change with electricity costs at the time of use.
Fixed rate and flat rate mean different things
A TOU contract can still be a fixed-rate plan. The scheduled prices or pricing formula stay fixed for the contract term, while the amount charged per kWh still changes by time of day. A flat rate uses one per-kWh price at every hour.
In competitive Texas markets, the official Power to Choose guide starts plan shopping with estimated monthly usage and includes a filter for plans whose pricing varies by time or day. That keeps the Texas example tied to the same decision method: begin with your usage, then compare the actual plan structure.
The exact clock belongs to the exact rate code, season, day type, and meter. Our separate off-peak electricity hours guide handles that schedule lookup. Here, the schedule is one input to the larger plan decision.
Calculate the break-even peak share
For a two-period plan, begin with the energy charge:
TOU energy charge = (peak kWh × peak rate) + (off-peak kWh × off-peak rate)
The peak share where a TOU rate and flat rate have the same energy charge is:
Break-even peak share = (flat rate - off-peak rate) / (peak rate - off-peak rate)
Consider an illustrative home using 900 kWh per month:
- Flat rate: $0.18 per kWh
- TOU off-peak rate: $0.12 per kWh
- TOU peak rate: $0.32 per kWh
The break-even peak share is (0.18 - 0.12) / (0.32 - 0.12), or 30%.
| Share used during peak | Flat energy charge | TOU energy charge | TOU difference |
|---|---|---|---|
| 40% | $162 | $180 | $18 more |
| 30% | $162 | $162 | Break-even |
| 25% | $162 | $153 | $9 less |
This is a screening calculation, rather than the final bill comparison. It assumes two price periods and equal fixed charges. A higher TOU customer charge lowers the allowable peak share. A baseline credit or EV credit can raise it. A three-period rate adds mid-peak kWh × mid-peak rate to the equation.
Build a full-year TOU plan comparison
One monthly bill shows how much electricity the home used, yet it cannot show when each kWh was used. A defensible comparison pairs 12 months of hourly or subhourly usage with every recurring charge and plan rule.
1. Identify the exact plan, meter, and eligibility path
Record the complete tariff or plan code for the current and proposed rates. One utility can offer several whole-home plans plus separate EV, solar, battery, or all-electric options.
The meter boundary matters. A whole-home TOU plan prices everything behind the main meter. A dedicated EV rate prices only the charging meter or approved submeter. Include any equipment qualification, enrollment deadline, account requirement, meter work, or installation cost attached to the option.
2. Collect the complete tariff and bill inputs
Use the tariff, rate summary, enrollment terms, and a recent bill to capture:
- every peak, mid-peak, off-peak, and super off-peak price
- summer and winter dates, plus weekday, weekend, and holiday treatment
- fixed customer, meter, or base charges
- supply, delivery, rider, tax, and minimum-bill charges
- tier thresholds, baseline allowances, usage credits, and bill credits
- demand charges or critical-event prices
- separate-meter installation costs and ongoing fees
- contract length, early termination fee, earliest switch-back date, and limits on later rate changes
- bill protection, including its duration and what happens after it ends
- solar import prices, export credits, net-metering treatment, and battery or EV eligibility
The word free receives the same full-price treatment. A zero retail energy charge can coexist with per-kWh delivery charges, taxes, and a monthly fee.
3. Download 12 months of interval usage
Many utility portals provide hourly or 15-minute usage as a CSV or through Green Button. The Department of Energy says Green Button data may be available in 15-minute, hourly, daily, or monthly intervals, depending on the utility. Hourly or finer data lets each interval land in the correct price block.
A full year captures seasonal rates, air-conditioning, electric heat, holidays, and months when the load shape changes. Solar homes also need imported and exported kWh kept separate when the tariff values them differently.
4. Price historical usage before assuming changes
Assign every interval to the proposed rate period, then calculate each month under both plans. Add the charges and credits that do not vary by time. This first scenario answers a clean question: what would the same historical usage have cost on the other plan?
Next, create a separate future-use scenario for known changes, such as adding an EV or heat pump. Separating historical usage from expected changes prevents the rate from receiving credit for behavior or equipment that may never materialize.
5. Compare the result with the utility calculator and plan downside
Run the same account through any utility rate-comparison calculator that uses actual interval history. Compare its annual estimate with your calculation and resolve material differences in rate periods, riders, credits, taxes, or eligibility assumptions.
Record the calculator's usage dates, tariff version, projected annual cost, and savings. Then place the earliest switch-back date beside the result. A narrow modeled advantage offers little buffer when the customer must remain on the rate for 12 months, when bill protection expires after an introductory period, or when seasonal prices can change before the commitment ends.
| Decision input | What it answers |
|---|---|
| Historical annual cost on current plan | The baseline the new plan must beat |
| Historical annual cost repriced on TOU | Whether the rate helps without lifestyle assumptions |
| Annual TOU cost after known load changes | Whether a new EV, heat pump, solar system, or battery changes the choice |
| One-time meter or enrollment cost | How long bill savings take to recover setup cost |
| Utility calculator estimate | Whether the utility's billing model agrees with your result |
| Commitment, protection, and switch-back dates | How much downside remains if actual bills run higher |
How EVs, heat pumps, solar, and batteries change the choice
Large electric equipment can make TOU more attractive and make a poor plan choice more expensive. Each setup changes a different part of the model.
EV charging
Use expected monthly charging kWh and the share that can occur within the lower-price period. Compare whole-home TOU with any dedicated EV rate. A separate meter can keep the rest of the house on a flat rate, but installation and recurring meter charges reduce the benefit.
The EV-rate value is:
eligible charging kWh × rate savings - added meter and customer charges
Our home EV charging cost guide provides the vehicle-efficiency and monthly-kWh calculation to use before applying either rate.
Heat pump or all-electric home
Space conditioning follows weather and comfort needs, so its hourly load is less flexible than EV charging. Model summer cooling and winter heating separately. Include auxiliary resistance heat, seasonal TOU prices, and any all-electric credit or special rate eligibility.
The annual load profile matters more than a mild-month estimate. Our heat pump electricity cost guide provides the kWh and seasonal-cost framework for that scenario.
Rooftop solar
Price grid imports and solar exports as separate flows. A home can export at one price during the day and buy electricity at a higher price during an evening peak. Net metering, net billing, grandfathered rates, mandatory solar TOU plans, and non-bypassable charges can each change the result.
Compare the current solar tariff with the proposed tariff before treating a lower import price as savings. Losing a valuable export credit can outweigh cheaper off-peak purchases.
Home battery
Include round-trip losses, displaced solar-export value, battery wear, and any reserve kept for outages. With a peak import price P, off-peak charging price O, and round-trip efficiency E, gross grid-arbitrage value per delivered kWh is:
P - (O / E)
That result is the ceiling before battery wear and fees. A battery can improve the TOU bill without making the battery purchase economical on rate arbitrage alone.
When TOU is likely to win
| Household pattern | Stronger starting point | Why |
|---|---|---|
| Existing peak share is comfortably below break-even | TOU | The rate can save without relying on major behavior changes |
| Large, predictable EV charging fits a lower-price period | Compare whole-home and EV-only TOU | Charging kWh can create a meaningful rate benefit |
| Battery or solar-plus-storage already covers high-price imports | TOU may fit | Grid purchases can concentrate in cheaper periods, subject to export rules and losses |
| Evening HVAC, cooking, and hot-water use dominate | Standard rate | High-price usage may be difficult to avoid |
| TOU only wins after optimistic load shifting | Standard rate | The projected margin depends on assumptions rather than measured use |
| Added meter fees consume most projected savings | Standard or whole-home rate | The special rate lacks enough kWh to recover its extra cost |
| Switch-back is restricted and the modeled margin is small | Standard rate | The downside lasts longer than the expected monthly benefit justifies |
Time-of-use plan FAQ
Does a TOU plan require a smart meter?
TOU billing requires a meter that can assign usage to time intervals. An existing smart meter usually handles whole-home TOU billing. Some EV rates require a second meter, submeter, or compatible charger instead.
Can you switch back from a TOU plan?
The enrollment terms control the answer. Some plans allow one rate change per year or require a 12-month stay. Others include a temporary bill-protection period or a defined exit path. Put the earliest switch-back date and any termination cost in the comparison before enrollment.
Does time-of-use pricing reduce total electricity use?
Its primary effect is shifting use away from expensive periods. Total kWh may fall, remain similar, or rise as off-peak use increases. A lower bill can come entirely from timing even when annual consumption does not change.
Use one decision rule
Choose a TOU plan when a full year of interval data, every tariff input, realistic equipment changes, and all enrollment costs put its annual bill below the alternative with a useful margin. Stay on the standard rate when savings depend on an optimistic future load shape or the commitment period creates more downside than the estimate supports.
After choosing the plan, use our off-peak electricity hours guide to map the exact rate code and lower-price schedule.