Time-of-Use Rates Explained — When Electricity Costs the Most

How Time-of-Use Rates Work

• Three rate windows define TOU pricing. Most utilities split the day into on-peak (highest cost, typically 3pm–9pm weekdays), shoulder (a transitional window in early morning or late evening), and off-peak (lowest cost, usually overnight and all weekend). Every kilowatt-hour you consume is billed at the rate that was active at the exact moment of consumption.
• The rate differential is the whole point. The premium for on-peak electricity reflects the higher marginal cost of generation during high-demand periods. The discount for off-peak reflects the lower cost of running baseload plants overnight. A typical California summer TOU plan, for example, charges 50¢/kWh on-peak but only 14¢/kWh off-peak — a 3.5× spread.
• Seasonal and weekday variations matter. Summer TOU windows are typically wider and more expensive because air conditioning drives peak demand. Winter windows may be shorter or shifted to morning hours for electric-heating regions. Weekends are usually off-peak across all hours, even during the typical weekday peak window.
• TOU plans reward flexibility, not just conservation. Cutting total kilowatt-hours helps on any plan, but TOU plans specifically reward shifting usage to off-peak windows. Running the dishwasher overnight, charging your EV after 9pm, or running the pool pump during shoulder windows can cut your supply charges by 20–40% on a TOU plan.
• TOU plans penalize inflexible usage. If you work from home with daytime AC and you're running heavy appliances during peak hours, a TOU plan can cost significantly more than a flat-rate plan. The math only works in your favor if your consumption pattern naturally misses peak windows — or you actively shift it.

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