What Is time of use electricity rates explained? Explained Simply (2026)

What Are Time of Use Electricity Rates?

Time of Use (TOU) electricity rates explained simply: they charge you different prices for electricity depending on when you use it. Instead of one flat rate per kilowatt-hour (kWh), your utility splits the day into time periods — each with its own price. This system reflects the real cost of generating and delivering electricity. Power plants (especially natural gas “peaker” plants) that run only during high-demand hours are expensive to operate. Utilities pass some of that cost to you through higher prices during those times. Most residential TOU plans include three periods:

• Peak hours: Highest demand and highest price (e.g., 2–7 pm on weekdays)
• Off-peak hours: Lowest demand and lowest price (e.g., 9 pm–9 am daily, plus weekends)
• Partial-peak (or mid-peak) hours: Intermediate cost (e.g., 12–2 pm and 7–9 pm on weekdays)

For example, in California under PG&E’s TOU-E plan in 2026, rates might be:

• Peak: 42.3¢/kWh
• Partial-peak: 28.5¢/kWh
• Off-peak: 14.6¢/kWh

That’s a 280% difference between cheapest and most expensive times. The exact numbers vary by utility, region, and year — but the structure is similar nationwide. TOU plans are becoming more common as utilities install smart meters and shift demand management responsibilities to customers. In 2026, over 35% of U.S. residential customers will be offered a TOU option — up from 18% in 2020 (U.S. EIA data).

How TOU Rates Work in Practice

A typical weekday under a TOU plan might look like this: - Off-peak: 9:00 pm – 9:00 am (12 hours) - Partial-peak: 12:00 pm – 2:00 pm and 7:00 pm – 9:00 pm (5 hours) - Peak: 2:00 pm – 7:00 pm (5 hours) Weekends and holidays are usually all off-peak. Your smart meter tracks usage by the hour and applies the correct rate. You’ll see breakdowns on your monthly bill — often in a table or chart. Some utilities even offer mobile apps that show real-time rate periods and projected costs. Let’s say you ran your dishwasher at 6:00 pm (peak). If it uses 1.2 kWh, and peak rates are 40¢/kWh, that cycle costs 48¢. The same dishwasher run at 10:00 pm (off-peak) at 15¢/kWh would cost only 18¢ — a 62% savings on that load. That’s the core idea: shifting usage to lower-cost hours reduces your bill — if you’re willing to adjust habits or use smart devices.

Who Benefits Most From TOU Plans?

Not everyone saves money on TOU plans — but certain households see real benefits. Best candidates include:

• Homeowners who work outside the home during peak hours (2–7 pm) and return after 7 pm
• People who run major appliances (dishwasher, washing machine, dryer) after 7 pm or before 2 pm
• Electrical vehicle (EV) owners who charge overnight (off-peak) instead of mid-afternoon
• Households with solar panels — TOU can maximize self-consumption of solar energy during midday partial-peak hours

In contrast, TOU may cost more

Retirees or remote workers who run appliances during midday or early evening

Families with young children who use high-wattage devices (e.g., oven, HVAC) during peak hours

Households with high baseline electricity use unrelated to scheduling

A 2025 study by the Consumer Financial Protection Bureau found that 61% of households switching to TOU saw lower bills, but only if they actively adjusted usage. The average savings: $137/year. The top 25% of savers cut bills by over 22%.

The Role of Smart Thermostats and Timers

Smart home tech makes TOU planning effortless. - A smart thermostat can pre-cool your home before peak hours, then raise the temperature slightly during 2–7 pm — using stored “coolth” instead of running the AC during expensive periods. - Water heaters with timers can run just before 2 pm or after 9 pm, not during peak. - EV chargers with smart scheduling can start at 10 pm, avoiding even partial-peak. These tools don’t require lifestyle changes — just initial setup. And many utilities offer rebates for enrolling in demand-response programs (e.g., PG&E’s SmartAC program saves customers $75/year on average).

How TOU Rates Save Money: A Real-World Example

Let’s walk through a real household’s before-and-after comparison. Baseline (Standard Flat Rate Plan): - 900 kWh/month used - Rate: 22.5¢/kWh - Monthly bill: $202.50 Same household on TOU plan (2026 PG&E-style rates): - 300 kWh during off-peak (15.2¢/kWh) - 250 kWh during partial-peak (27.8¢/kWh) - 350 kWh during peak (39.6¢/kWh) - Total: (300 × 0.152) + (250 × 0.278) + (350 × 0.396) = $227.90 Wait — that’s higher. But what if they shift just 100 kWh from peak to off-peak? - Off-peak: 400 kWh - Partial-peak: 250 kWh - Peak: 250 kWh - Total: (400 × 0.152) + (250 × 0.278) + (250 × 0.396) = $202.60 Still only break-even. Now shift 200 kWh: - Off-peak: 500 kWh - Partial-peak: 250 kWh - Peak: 150 kWh - Total: (500 × 0.152) + (250 × 0.278) + (150 × 0.396) = $177.90 → **$24.60/month saved ($295/year)** The key insight: shifting 10–15% of peak usage to off-peak can generate savings in most cases. That’s often achievable with small adjustments — like running the dishwasher after 9 pm instead of at 6 pm.

Comparing TOU Plans: What to Watch For

Not all TOU plans are equal. Utilities design them differently — and some are better than others.

Key Differences Between Utilities (2026 Estimates)

| Utility Region | Peak Hours (Weekdays) | Off-Peak Hours | Peak Rate (¢/kWh) | Off-Peak Rate (¢/kWh) | Seasonal Variations | |----------------|------------------------|----------------|-------------------|------------------------|---------------------| | California (PG&E) | 2–7 pm | 9 pm–9 am | 42.3 | 14.6 | Summer peak rates +35% | | Texas ( Oncor) | 2–8 pm | 10 pm–12 pm Sat–Sun | 28.4 | 9.7 | No summer surcharge | | Florida (FGCUA) | 1–7 pm | 9 pm–1 pm daily, all weekends | 31.6 | 13.9 | Flat rates year-round | | New York (Con Edison) | 2–7 pm (Jun–Sep), 5–9 pm (Oct–May) | 9 pm–5 am, weekends | 35.2/28.9 | 12.1 | Winter peak starts later | Notice: Off-peak rates are often 50–65% lower than peak rates — but the gap is wider in some regions. Also watch for:

• Seasonal adjustments: Summer rates can be 20–40% higher than winter rates during peak hours.
• Minimum monthly charges: Some TOU plans include higher fixed fees (e.g., $10–$15/month), which can offset savings.
• Weekly vs. daily patterns: A few plans have different weekend pricing (e.g., Sunday partial-peak).

Before switching, run a free bill analysis. Many utilities offer online tools — or use third-party calculators at sites like Compare TOU Plans.

Common Mistakes to Avoid With TOU Rates

Even well-intentioned customers sometimes make choices that increase their bills on TOU plans. Mistake 1: Assuming “all evening is off-peak” Many people think 6–9 pm is cheap — but it’s often partial-peak (or peak in some plans). Always verify your utility’s exact hours. Mistake 2: Running multiple high-wattage appliances simultaneously during peak A 4,500-watt water heater + 1,800-watt oven + 1,500-watt AC = 7,800W. At 40¢/kWh, that’s $3.12 per hour. Mistake 3: Ignoring seasonal shifts In summer, peak may start earlier (1 pm instead of 2 pm) and last longer (until 8 pm). Your winter pattern may not apply. Mistake 4: Not reviewing bills monthly Smart meters let you track usage by hour. Use that data to adjust — e.g., if your peak usage is >35% of total, you’re likely overspending.

Pro Tips for TOU Success

• Set timers for major appliances: Dishwashers, washing machines, pool pumps.
• Pre-cool or pre-heat: Lower AC temperature before 2 pm so the system runs less during peak.
• Charge EVs overnight: Most EVs charge 3–4× faster (and cheaper) off-peak.
• Batch cooking: Roast a chicken and use the oven’s residual heat to warm food — no extra power needed.

1. Are TOU rates always cheaper than flat rates?

No — not automatically. TOU is a structural change, not a discount. Savings depend entirely on when you use electricity. If your usage mirrors peak hours, your bill may rise. Use a bill comparison tool before switching.

2. How do I know if my utility offers TOU?

Check your utility’s website or call customer service. In many states (e.g., California, Texas, New York), utilities must offer TOU as an option. Look for plans named “TOU,” “Time of Use,” or “Smart Rate.”

3. What happens if I don’t switch to TOU?

You’ll stay on your current plan (usually a flat or tiered rate). In most cases, you can switch back and forth once per billing cycle — but policies vary. Some utilities charge a small fee for switching.

4. Do TOU rates apply to solar customers?

Yes — and they can be especially powerful. If you generate excess solar during the day, you sell it back at the peak or partial-peak rate (often higher than your TOU buyback rate). But you still pay peak rates for evening use. Net-metering rules affect this — check your state’s policy.

5. Is there a risk of higher bills during summer?

Yes. Summer peak hours often last longer (e.g., 1–8 pm vs. 2–7 pm in winter), and AC demand spikes. Many utilities apply a summer surcharge — so your peak rate in July may be 30% higher than in January. Plan ahead by shifting laundry and pool pumping to early morning.

6. Can I get a smart meter to track TOU usage?

Yes — utilities install them automatically when replacing old meters. You’ll get hourly usage data in your online account. Some even send alerts when you enter peak hours.

7. Where can I compare TOU plans in my area?

Use our free tool: Compare TOU Plans. Enter your ZIP code and average monthly usage — we’ll show you estimated savings for every plan offered by your utility in 2026.