The need to know on TOU

Can you remember back to when you signed up with your local electricity utility?

Probably not. Contacting your local utility ranks pretty low on the ‘memorable’ list when moving in: likely somewhere in-between trying not to punch a hole in your wall with your couch and thinking about future decor for your living room. Utilities are just something you set and forget — right?

The truth is there actually is a way you might be able to pay less than you currently do for your electricity: it’s a type of pricing called time-of-use (TOU) billing. 

When you signed up for your utility, you were probably given a fixed rate pricing structure. That’s what most Americans have. You use a certain amount of kilowatt hours (kWh) per month, your utility multiplies it by a fixed price, and you get your bill. Simple. This works, but it’s not always the most affordable way to use energy.

Instead of charging you a fixed rate, time-of-use pricing charges you more during peak hours and less during off-peak hours. If you use it right, it can save you a lot of money — and it has a positive impact on the environment. Here's how it all works.

How much can you really save?

A lot! Here’s a simple example.

Let’s say you use 10,500kWh per year (the average for American households). Now imagine that your energy utility is PG&E — we’re using them as an example since they’re one of the largest electric utilities in the United States. This is what their pricing looks like:

PGE's TOU rate plans are available to ratepayers across much of California.

For this example, we’ll pretend that 70% of your energy usage is below the baseline allocation (less expensive) and 30% is above the baseline allocation (more expensive). In this situation, here’s what your year-end bills would look like for the two pricing plans:

• Fixed-rate billing: ~$4,800 per year

• Time-of-use billing: ~$4,300 per year

Great! Five hundred dollars in savings is a lot.

But to see those savings, you have to earn them. You can do that by shifting most of your energy usage to off-peak hours. In most places, this means avoiding electricity usage between 4 - 9 PM. 

Fortunately, there’s a way you can benefit from time-of-use pricing and still keep using your appliances whenever you want — we’ll get there in a moment. First, though, it is worth examining why time-of-use rates even exist in the first place.

Why time-of-use pricing exists

TOU rates were first pioneered throughout the 1970s, and became popular offerings throughout the 1990s and early 2000s as an attempt to manage rapidly growing electricity demand at home.

Graph adapted from Statista.

But that energy usage at home wasn’t consistently distributed throughout the day. Electricity demand would surge during the afternoons and evenings — when people got home from school and work, and powered on their stoves, dishwashers, televisions, air conditioners, and more. 

These spikes in electricity usage put strain on an electrical grid that was already struggling to keep up with so much new demand. Utilities had two options to respond: reduce demand during peak hours, or increase supply. 

Generating extra electricity during peak hours, though, is inefficient and expensive. A few reasons why:

• Peak usage often makes energy companies rely on inefficient, expensive, and carbon-emitting ways to generate electricity (like having to start up separate, often less-efficient peaker plants)

• Peak energy load throughout the grid means more energy lost due to resistance

• Coping with demand can often mean paying more people to generate the energy, which means higher costs (for the same service)

This means that decreasing demand is the cheaper, cleaner, and easier option for utilities. Instead of turning on peaker plants, they developed TOU rates to financially reward people for avoiding electricity use during peak demand periods. A win for utilities, and a win for their customers! 

(If you want to learn more about this, check out our post: Energy Time Machine).‍

How to take advantage of time-of-use rates

In theory, time-of-use is great — it’s good for the environment and it can save you money. But before you call up your energy utility and change your billing plan, remember that time-of-use rates only save you money if you are able to switch your energy use to off-peak hours.

If you’re like most people, though, you probably don’t want to stop, or seriously curb, your electricity use between something like 4PM and 9PM. You’ve got things to do. Dishes to wash. Dinner to cook!

And so the hard reality of time-of-use billing is that, if you want to save money, you generally need to be willing to change your behavior in order to save money. If you work from home — or have a family member at home during the day — you can consciously shift your laundry cycles to the morning, or you could do your baking before peak hours. These could help you save.

Not everyone has the luxury to shift their usage, though: many of us have responsibilities during the day that keep us outside of our homes (like work). And some electricity use (like air conditioning, or cooking dinner) isn’t as easy to shift in time. That’s starting to change, though.‍

Why battery-powered appliances make a difference

There is one way you can benefit from time-of-use billing without having to shift your appliance usage to off-peak hours: with electric, battery-enabled appliances. 

Imagine, for example, that you had a battery-integrated stove. If you were able to charge your battery during off-peak hours (at 11AM) and then cook during peak hours with your stored power (at 6PM), then you’d be able to pay off-peak rates for on-peak usage. 

Over years of using a battery-integrated appliance, those TOU savings can really add up, so you can electrify your home and save money. Best of both worlds!

At Impulse, we’re making it delightfully easy to take advantage of your TOU rates. Our battery can charge during off-peak hours, so you can use cheap and clean energy whenever you like — even during on-peak hours. Do all of that while enjoying unprecedented, professional-grade power. 

As electric appliances become increasingly mainstream, expect to see even more appliances equipped with this kind of battery technology. It’ll be easier than ever to take advantage of time-of-use rates — a win for you, your utility, and the environment.