What Is a Time-of-Use Electricity Rate?
Learn how time-of-use (TOU) utility tariffs charge varying electricity rates during peak, off-peak, and shoulder hours to incentivize off-peak load shifting.
Key Takeaways & Core Facts
- Time-of-use (TOU) rates charge different kWh prices based on the time of day, day of the week, and season.
- Peak hours occur when grid electricity demand is highest (typically late afternoon to evening in summer), resulting in higher rates.
- Shifting major electricity usage (EV charging, laundry, dishwasher) to off-peak hours can lower monthly electricity costs.
Direct Answer: What Is a Time-of-Use (TOU) Electricity Rate?
A Time-of-Use (TOU) rate is a variable utility pricing structure where the price of electricity ($/kWh) changes based on the time of day, day of the week, and season.
Instead of charging a flat rate all day (e.g., 18 ¢/kWh), utilities charge higher rates during high-demand Peak hours (e.g., 32 ¢/kWh) and lower rates during low-demand Off-Peak hours (e.g., 12 ¢/kWh).
How TOU Schedules Work: Peak, Shoulder & Off-Peak Periods
Time-of-use tariffs require an advanced smart meter to record hourly interval consumption. Rates are divided into distinct daily windows:
- Peak Hours: Period of highest grid energy demand (for example, Southern California Edison's TOU-D-PRIME plan uses a 4 p.m.–9 p.m. time window, but its price classification varies by season and whether the day is a weekday or weekend, while Arizona Public Service's current Time-of-Use plan uses a 4 p.m.–7 p.m. weekday window, excluding applicable holidays). Exact peak hours, seasonal schedules, and day rules vary by utility provider.
- Off-Peak Hours: Period of lowest grid demand (nights, early mornings, and weekends). Electricity pricing is lowest.
- Shoulder / Mid-Peak Hours: Intermediate pricing periods between off-peak and peak hours (e.g., late morning to early afternoon).
- Seasonal Schedules: Utilities adjust TOU time windows between summer (cooling demand) and winter (heating demand) seasons.
Flat Rate vs. Time-of-Use Monthly Cost Comparison
| Household Consumption Profile | Usage Breakdown | Standard Flat Bill (18 ¢/kWh) | TOU Bill (Peak 32¢ / Off-Peak 12¢) | Net Monthly Savings |
|---|---|---|---|---|
| High Peak Usage (Unadjusted) | 40% Peak / 60% Off-Peak | $144.00 | $160.00 | -$16.00 (Higher Cost) |
| Balanced Household | 25% Peak / 75% Off-Peak | $144.00 | $136.00 | +$8.00 Savings |
| Shifted Off-Peak (EV + Laundry) | 10% Peak / 90% Off-Peak | $144.00 | $112.00 | +$32.00 Savings |
* Note: TOU hours, seasonal schedules, and pricing ratios vary by utility company. Figures represent an illustrative calculation assumption for an 800 kWh monthly profile.
Assumptions & Load Shifting Limitations
Enrolling in a TOU rate plan does not automatically reduce your electric bill. If your household cannot shift heavy loads (such as air conditioning, EV charging, or clothes drying) away from peak afternoon hours, a TOU rate may increase your monthly charges.
Analyze your usage under TOU plans with our Electricity Bill Analyzer or learn more about peak hours in our Peak vs. Off-Peak Hours Guide or EV charging costs in our EV Home Charging Guide.
Electricity Bill Analyzer
Compare flat-rate vs. time-of-use monthly electric bill costs based on your appliance schedules.
Analyze TOU Rates →Government & Official Data Sources
- U.S. Department of Energy — Time-of-Use Rate Structures & Demand Response Programs (Time-variable electricity pricing, peak period schedules, and load shifting incentives)
- National Renewable Energy Laboratory — Utility Rate Database & Time-of-Use Tariff Analysis (Residential TOU schedules, seasonal rate variations, and smart meter interval data)