For decades, your electric bill worked one way: you paid a flat price per kilowatt-hour, and the only thing that mattered was the total. That era is ending. Utilities across the country are moving households onto time-of-use (TOU) rates, where the same kilowatt-hour can cost three times more at 6 p.m. than it does at midnight.
The shift is already well underway. About 62% of U.S. residential customers now have access to a TOU plan, and California, Colorado and New Jersey have made these rates the default for new customers rather than an opt-in choice. If you have not checked your bill lately, you may already be on one.
The good news: TOU rates reward a habit change that costs nothing. Here is how they work and where the savings actually come from.
What a Time-of-Use Rate Actually Is
A TOU plan divides the day into pricing windows. Most utilities use three:
- Peak – typically 4 p.m. to 9 p.m. on weekdays, when demand across the grid is highest and the most expensive power plants come online.
- Partial peak (or mid-peak) – the shoulder hours just before and after the peak window.
- Off-peak – overnight, early morning, and often all day on weekends and holidays.
The logic is simple. Electricity cannot be stored cheaply at grid scale, so utilities must build enough capacity to meet the single worst hour of the year. Charging more during that hour pushes demand elsewhere and delays the need for new power plants.
How Big Is the Price Gap?
Bigger than most homeowners expect. Nationally, the spread between peak and off-peak averages 8 to 15 cents per kWh. In high-cost states it is far wider.
- Southern California Edison – the default TOU-D-4-9PM plan peaks near 58 cents per kWh, and some summer plans reach into the 70s.
- PG&E – the E-TOU-C plan runs roughly 50 to 65 cents per kWh at peak versus 20 to 25 cents off-peak.
- PSE&G in New Jersey – around 31 cents at peak against 21 cents off-peak, a gentler but still meaningful gap.
One detail catches people out: in California the peak window applies every day, weekends and holidays included. Do not assume Saturday is cheap without reading your tariff.
Where the Savings Actually Come From
You do not need to use less electricity to win on a TOU plan. You need to move it. A household that shifts about 30% of its consumption out of the peak window typically saves $200 to $400 a year.
The savings concentrate in a handful of large, flexible loads:
- EV charging. This is the single biggest lever. Charging overnight instead of on arrival home saves EV households $300 to $600 annually. Nearly every modern charger and vehicle can schedule this – see our guide to home EV charging setup.
- Laundry and dishwashing. Run the dishwasher on a delay start after 9 p.m. Do laundry in the morning or late evening.
- Water heating. A heat pump water heater on a timer can do most of its work off-peak and coast through the evening on stored hot water.
- Air conditioning. Pre-cool the house to a lower setpoint by 3:30 p.m., then let the thermostat drift up a few degrees during peak. The building holds the cool for hours.
Pre-Cooling: The Trick That Does the Most Work
Air conditioning is what makes the 4-to-9 window expensive in the first place, and it is also the load with the most built-in flexibility.
Set your thermostat to cool the house to 70 or 71 degrees between roughly 1 p.m. and 4 p.m., while power is still cheap. When the peak window opens, let the setpoint rise to 78. A reasonably insulated house will take two to three hours to drift up, which covers most of the expensive period.
Any smart thermostat can automate this with a scheduled setpoint change. Several utilities also offer a TOU-aware mode that reads your rate plan directly. Pairing this with app-based energy management lets you see the effect on your bill in near real time.
When a TOU Plan Is a Bad Fit
TOU is not universally better. You may pay more if:
- Someone is home all day and the house runs AC or heat continuously through the afternoon.
- Medical equipment or a home office makes peak-hour usage non-negotiable.
- Your consumption is already low and flat, leaving little to shift.
Most utilities publish a rate comparison tool that runs your last 12 months of actual usage against each available plan. Use it before switching – and check whether your state offers a bill-protection period that refunds the difference if the new plan costs you more in year one.
How Solar and Batteries Change the Math
TOU rates are what make home batteries pencil out in expensive markets. Solar production peaks around midday and falls off well before the 4 p.m. peak window – exactly when power gets costly.
A battery bridges that gap. It stores cheap midday solar and discharges it through the evening peak, so you buy almost nothing at the highest rate. In California, New York and Massachusetts, solar-plus-storage households on TOU plans commonly save $600 to $1,500 a year. Our overview of home battery storage covers sizing and payback in more detail.
A Practical First Week
- Pull up your utility account and confirm which rate plan you are on and the exact peak hours.
- Set your EV to charge starting at midnight.
- Program the dishwasher and washing machine to run off-peak for one week.
- Add a pre-cool block to your thermostat schedule.
- Compare the next bill to the same month last year.
Four changes, none of which cost money or reduce comfort. If you want more levers after that, our list of 10 proven ways to lower your electricity bill works alongside a TOU plan rather than against it.
The Bottom Line
Time-of-use pricing turns your electric bill into a schedule problem rather than a consumption problem. The households that lose on TOU are the ones who never noticed the switch; the ones who win simply moved a few big loads past 9 p.m. and set a thermostat to pre-cool. With peak rates approaching 60 cents per kWh in parts of the country, that small amount of attention is worth a few hundred dollars a year – and it costs nothing but a one-time afternoon of setting timers.
