The How and Why of Time-of-Use Rates

Electricity rate structures can get confusing. We get that. With the constant changes and rate hikes, how can you possibly keep track of it all? Well, here’s another change. California’s independently owned utilities (IOUs) are in the process of changing the way electricity is priced from how much you use to how much and when you use it. This is what’s called a “time-of-use” rate structure.

As demand increases, so does price. Electricity is no different. Time-of-use rate structures are meant to be set up so electricity costs more when demand is highest.

Above is an example of how time-of-use rates work. As you can see, rate structures are broken up by season. Summer rates are higher because people use more electricity to run things like their air conditionings and swimming pools. Time-of-use rate structures are intended to mimic average consumption. That means you’ll be charged the most for electricity when you’ll likely need it the most.

On a time-of-use rate structure, what you pay per kilowatt hour changes throughout the day. How much electricity you use doesn’t matter as much as when you use it.

Why Should I Care?

This rate structure isn’t always beneficial. Going solar locks you into you an agreement with your utility. Mandatory time-of-use rates are not yet in effect, so there’s still time to get grandfathered into the current structure.