Time-of-Use Electricity Rates Explained: How to Save with TOU Plans

July 14, 2026 · Energy Costs · 9 min read

For most of the past century, electricity was priced the same no matter when you used it. A kilowatt-hour cost the same at 3 a.m. as it did at 5 p.m. But as grids modernize and smart meters become standard, more and more utilities are offering, and sometimes requiring, time-of-use (TOU) rates. Under a TOU plan, the price of electricity changes depending on the time of day. Used wisely, TOU rates can save you real money without using any less electricity. Used carelessly, they can raise your bill. This guide explains how they work and how to come out ahead.

What Are Time-of-Use Rates?

Time-of-use rates divide the day into pricing periods, usually labeled peak, off-peak, and sometimes a super off-peak or mid-peak window. Electricity costs the most during peak hours, when overall demand on the grid is highest, and the least during off-peak hours, when demand is low.

• Peak (or on-peak): The most expensive period, typically late afternoon and early evening on weekdays (for example, 4 p.m. to 9 p.m.), when people come home, cook dinner, and run air conditioning.
• Off-peak: The cheapest period, usually overnight and early morning, when demand is low.
• Mid-peak or partial-peak: A middle-priced window that some utilities place between peak and off-peak.

The price gap between peak and off-peak can be dramatic. It is common for peak rates to be two to four times higher than off-peak rates. A plan might charge 45¢/kWh during peak and just 12¢/kWh off-peak.

Why Utilities Offer TOU Rates

Electricity cannot be easily stored at grid scale, so utilities must generate enough power to meet demand at every moment. During peak hours, they fire up expensive "peaker" plants to keep up, and building enough capacity for those few peak hours is costly. TOU rates are designed to spread demand more evenly across the day by giving customers a financial reason to shift usage away from the crunch. When customers move laundry, dishwashing, and EV charging to off-peak hours, the grid runs more efficiently and everyone benefits from lower system costs.

The rise of rooftop solar has added another wrinkle. On sunny afternoons, solar floods the grid with cheap power, but output drops sharply in the early evening just as demand peaks. This "duck curve" is why many TOU peak windows have shifted later, into the 4 p.m. to 9 p.m. range, to reflect when the grid is actually stressed.

Who Benefits from Time-of-Use Rates?

TOU plans are not automatically cheaper for everyone. Whether you save depends on how flexible your usage is. You are a strong candidate if:

• You own an electric vehicle. Charging overnight on super off-peak rates is the single biggest TOU win. See our guide on EV charging costs at home.
• You are away during peak hours. If your home is empty from 4 to 9 p.m., you naturally avoid the expensive window.
• You can shift big loads. Running the dishwasher, washer, dryer, and pool pump at night is easy to automate.
• You have solar or a home battery that offsets peak usage or lets you store cheap off-peak power.

On the other hand, TOU rates may cost you more if you are home all day running air conditioning during peak hours, if you work from home and cannot avoid daytime usage, or if your heaviest usage naturally falls in the late afternoon and evening.

How to Save Money on a TOU Plan

The core strategy is simple: move as much electricity use as possible out of the peak window. Here is how:

1. Automate large appliances. Use delay-start features on dishwashers, washers, and dryers to run them after the peak period ends.
2. Charge your EV overnight. Set your car or charger to start after super off-peak begins.
3. Pre-cool or pre-heat your home. Run the AC hard just before peak begins, then let the thermostat drift up during peak hours. A smart thermostat can do this automatically.
4. Shift cooking. Use a microwave, slow cooker, or air fryer instead of the electric oven during peak, or cook earlier.
5. Run the pool pump and other flexible loads off-peak.
6. Heat water off-peak. If you have an electric water heater, a timer can heat water overnight for use the next day.

A Real Savings Example

Consider a household that uses 900 kWh a month, with 300 kWh normally falling in peak hours. On a flat rate of 18.56¢/kWh, their bill is about $167. On a TOU plan with 42¢ peak and 15¢ off-peak, if they do nothing, that same usage costs more: 300 kWh × $0.42 + 600 kWh × $0.15 = $126 + $90 = $216. But if they shift 200 of those peak kWh to off-peak, the cost drops to 100 × $0.42 + 800 × $0.15 = $42 + $120 = $162, now cheaper than the flat rate. The lesson: on TOU, behavior is everything.

TOU vs Tiered vs Flat Rates

It helps to understand how TOU fits among the three main residential rate structures:

• Flat rate: One price per kWh at all times. Simple and predictable.
• Tiered rate: Price rises as you use more within a billing period, regardless of time. Rewards low total usage.
• Time-of-use rate: Price depends on the time of day, not the total amount. Rewards shifting usage rather than reducing it.

Some utilities even combine tiered and TOU structures. To understand which plan you are on and how to read the charges, see our guide on how to read your electric bill.

Should You Switch to a TOU Plan?

Before enrolling, ask your utility for a "rate analysis" or "bill comparison" tool. Many utilities can look at your past 12 months of smart-meter data and estimate what you would have paid on each available plan. Some also offer a "bill protection" period when you first switch, refunding the difference if TOU ends up costing you more. This makes trying a TOU plan low-risk, especially if you are willing to shift some usage.

The Bottom Line

Time-of-use rates change the price of electricity based on when you use it, rewarding customers who shift laundry, dishwashing, EV charging, and cooling away from the expensive late-afternoon peak. For flexible households, and especially EV owners, TOU plans can cut bills significantly. For those locked into peak-hour usage, they can backfire. The key is to know your own usage pattern and run the numbers first. Estimate the impact with our Monthly Electric Bill Calculator, and pair a TOU plan with the efficiency ideas in our guide to what uses the most electricity in your home.

Frequently Asked Questions

What is a time-of-use electricity rate?

A time-of-use (TOU) rate charges different prices for electricity depending on the time of day. Power costs the most during peak hours, typically late afternoon and early evening on weekdays when grid demand is highest, and the least during off-peak hours, usually overnight. The gap can be large, with peak prices often two to four times higher than off-peak. TOU plans reward customers who shift usage to cheaper times rather than simply using less.

Will I save money on a time-of-use plan?

It depends entirely on your flexibility. If you can move big loads like laundry, dishwashing, EV charging, and pre-cooling to off-peak hours, or if you are naturally away during the late-afternoon peak, a TOU plan can cut your bill significantly. But if you are home all day running air conditioning during peak hours and cannot shift that usage, a TOU plan may cost you more than a flat rate. Reviewing your usage pattern first is essential.

What are typical peak hours for electricity?

Peak hours are usually weekday late afternoons and early evenings, commonly around 4 p.m. to 9 p.m., when people return home, cook, and run air conditioning. This window has shifted later in recent years because abundant solar power makes midday electricity cheap, while the early evening 'solar cliff,' when solar output fades but demand stays high, is now when the grid is most stressed. Exact hours vary by utility, so check your specific plan.

How can I save the most on a TOU plan?

Move as much usage as possible out of the peak window. Automate dishwashers, washers, and dryers to run after peak ends, charge your EV overnight, pre-cool or pre-heat your home before peak begins and let it coast during peak, and shift cooking to a microwave or slow cooker during expensive hours. A smart thermostat can handle much of the load-shifting automatically.

Can I switch back if a time-of-use plan costs more?

Usually, yes. Most utilities let you change rate plans, and many offer a 'bill protection' period when you first enroll in TOU, refunding the difference if it ends up costing more than your old plan. Some also provide a rate-analysis tool that estimates what you would have paid on each plan based on your past year of smart-meter data, so you can decide before switching.

What is the difference between time-of-use and tiered rates?

Tiered rates charge more as your total usage rises within a billing period, regardless of when you use power, so they reward using less overall. Time-of-use rates charge based on the time of day rather than the total amount, so they reward shifting usage to cheaper off-peak hours. Some utilities combine the two. Tiered plans favor low-usage households, while TOU plans favor households that can move big loads to off-peak times.

Are time-of-use rates becoming mandatory?

In some areas, yes. As smart meters become standard, a growing number of utilities are making time-of-use the default rate, particularly in states like California, with customers able to opt out to a different plan. The trend reflects the grid's need to manage peak demand and integrate solar power. If your utility moves you to a default TOU plan, review your usage pattern and consider whether shifting some loads, or opting out, serves you better.