What Are Time-of-Use Electricity Rates?
Time-of-use (TOU) pricing is an electricity rate structure where the cost per kilowatt-hour varies based on the time of day and sometimes the season. Instead of paying a flat rate regardless of when you use power, TOU customers pay more during peak demand periods — typically late afternoon and evening on weekdays — and less during off-peak hours like overnight and weekends.
TOU rates are expanding rapidly. Many utilities are making them the default rate for residential customers, particularly for new solar adopters, EV owners, and smart meter customers. Understanding how TOU pricing works — and how to take advantage of it — can meaningfully reduce your electricity bill regardless of whether you have solar panels.
How TOU Rate Structures Work
Most TOU rate plans divide the day into two to three pricing tiers:
- Peak hours: The most expensive period — typically 4 PM to 9 PM on weekdays. This is when the electric grid experiences its highest demand as millions of households run air conditioning, cook dinner, and return home from work simultaneously. Utilities charge premium rates to incentivize customers to shift usage away from this period. Peak rates are typically 2 to 4 times the off-peak rate.
- Off-peak hours: The least expensive period — typically overnight from 10 PM to 7 AM. The grid has surplus capacity and low demand. Charging EVs, running dishwashers, and doing laundry during off-peak hours takes advantage of this surplus at the lowest available rate.
- Mid-peak or shoulder hours (some plans): A middle pricing tier covering the transition periods between peak and off-peak — often morning hours and weekend afternoons. Rates are moderate.
Seasonal pricing adds another dimension — many TOU plans have higher summer peak rates (when air conditioning demand is highest) than winter peak rates.
Example TOU Rate Structure
A typical California TOU rate structure illustrates the pricing spread:
- Peak (weekdays 4 PM–9 PM): $0.45 per kWh
- Off-peak (all other hours, weekends, holidays): $0.30 per kWh
A household that runs its dishwasher, washing machine, and EV charger during peak hours pays $0.45 per kWh for that load. Shifting those same loads to after 9 PM drops the cost to $0.30 per kWh — a 33 percent reduction on those specific loads. For a household using 20 kWh of shiftable loads daily, that is a $3.00 daily difference — over $1,000 per year.
How Solar Interacts With TOU Rates
TOU pricing changes the solar economics calculation in ways that are not always obvious. Solar panels produce peak power during the middle of the day — 10 AM to 2 PM — which typically falls in the off-peak or mid-peak period under most TOU structures. Under net metering, that solar production is credited at the off-peak rate.
In the late afternoon peak period — when rates are highest — solar production has declined as the sun moves lower in the sky. As a result, households often export cheap solar power during the day and import expensive grid power during the late afternoon peak. California\’s NEM 3.0 policy, which significantly reduced export compensation rates, was designed specifically around this dynamic.
This is why TOU rates are one of the strongest arguments for pairing solar with battery storage. A battery system can:
- Absorb excess solar production during the cheap midday hours
- Discharge stored solar energy during the expensive peak hours
- Reduce or eliminate grid imports during the peak period entirely
- Generate meaningful bill savings from peak shaving — independent of backup power benefits
Under a TOU rate with a $0.15/kWh spread between peak and off-peak, a home battery storing 10 kWh daily can generate $1.50 in peak-shaving savings per day — $547 per year — purely from time-shifting its stored energy, before accounting for any outage backup value.
Strategies to Reduce Your Bill Under TOU Pricing
Shift Flexible Loads to Off-Peak
Many household loads are flexible — they do not need to happen at a specific time. Shifting these to off-peak hours is the simplest TOU optimization strategy:
- Dishwasher — use the delay start feature to run overnight
- Washing machine and dryer — run loads after 9 PM or on weekends
- EV charging — schedule to start at 10 PM or midnight
- Pool pump — set timer to run during off-peak hours
- Water heater — set a timer or use smart water heater controls to heat during off-peak
Pre-Cool During Off-Peak Hours
Air conditioning is typically the largest peak-hour load. Instead of running AC continuously during peak hours, pre-cool your home to 68 to 70 degrees by 3 PM using cheaper off-peak electricity, then raise the thermostat to 74 to 76 degrees during the peak period and let the thermal mass of the cooled house coast through the expensive hours. Smart thermostats make this automatic once programmed.
Use Battery Storage for Peak Shaving
A home battery storage system is the most effective TOU optimization tool for homes that already have or are considering solar. The battery charges during the cheap midday solar production period and discharges during the peak hours — eliminating the most expensive grid electricity automatically. Battery management apps from Tesla, Enphase, and EcoFlow all include TOU optimization modes that learn your utility\’s rate schedule and operate the battery accordingly.
Shift EV Charging to Off-Peak
EV charging is one of the highest-impact TOU optimization opportunities because the load is large (7 to 11 kW for Level 2 charging) and entirely flexible. Every major EV and most Level 2 chargers allow scheduled charging — set the charge window to 10 PM to 6 AM and the vehicle charges at off-peak rates automatically every night. For a household driving 40 miles per day and charging a 4-mile-per-kWh EV, scheduled overnight charging versus random peak-hour charging saves approximately $200 to $400 per year at typical TOU rate spreads.
How to Find Out If You Are on a TOU Rate
Your utility bill should indicate your rate schedule — look for terms like \”Time-of-Use,\” \”TOU,\” or a specific plan name like \”E-TOU-C\” or \”Time-of-Use 4-9 PM.\” If you cannot find it on your bill, log into your utility\’s customer portal or call their customer service line and ask which rate plan you are on and what TOU options are available.
Many utilities now allow customers to view their hourly usage data through their online portal or through a smart meter. Reviewing your hourly consumption profile reveals exactly when you are using the most power and how much you could save by shifting loads.
Bottom Line
Time-of-use electricity rates create both a challenge and an opportunity. The challenge is avoiding expensive peak-hour consumption. The opportunity is using cheaper off-peak electricity strategically for EV charging, appliances, and battery storage. For solar homeowners, pairing with a battery storage system that manages TOU automatically is the highest-return optimization available — reducing peak grid imports while maximizing the value of stored solar energy. Even without solar or storage, load-shifting dishwashers, laundry, and EV charging to off-peak hours can reduce annual electricity costs by hundreds of dollars with no capital investment required.
