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Time of Use Pricing

Updated on
min reading

Time of use pricing is pretty much what it sounds like -- electricity prices that vary depending on when you use energy. Is time of use pricing the best option available for you and your needs?

Our Recommendations

Summary of Pros & Cons
Pros Cons
 Opportunity to vary your times of consumption  Standard time-of-use rates are higher than normal
 Advisable for consumers with high and flexible consumption  Failure to shift enuogh consumption into free periods could result in higher bills

Depending on your situation, a time of use plan may prove cost-advantageous. Our recommendation for you really depends--if you consume a lot of energy, and much of that can be shifted into one of the "free consumption" periods, then you could stand to save. However, if you are an average user without much ability to be flexible in your consumption habits, you will probably end up paying more every month. 

Time Of Use Plans Explained

Time of use plans charge you different prices for your electricity depending on when you use it. Electricity consumed at night or on the weekends may be offered for "free," while electricity consumed during normal-use hours will be billed at an elevated rate. This privileges those users who can shift their consumption habits -- for example, chatrging an electric car, or running a washing machine -- onto the free use periods.

However, much of your home's electricity consumption isn't that flexible. Your refrigerator and other appliances run all day long, and can't easily be switched to other times. Furthermore, you should read the agreement carefully and make sure that "free consumption" is actually free consumption. A real time of use plan will require a smart meter in order to track your real-time energy usage. Where these are unavailable, companies may instead offer you a percentage based rebate on your bill every month as an estimation of your energy use during the "free consumption periods."

Why Choose a Time Of Use Plan?

High Energy Consumption

The first criteria from being able to benefit from a time of use plan is that you regularly consume a lot of energy. This is important, because if you don't consume a lot of energy, then you won't be able to put enough "weight" into the free use category to significantly offset the energy that you pay higher rates for. 

Flexible Energy Consumption

Secondly, you need to be able to shift enough of your energy use into a free period for it to matter. Let's look at this with some sample energy consumption:

Let's imagine that you consume 2000 kWh/month, and that you pay $0.08 per kWh for your electricity. You're trying to decide whether a plan that offers you free nights and weekend consumption, but increases the price of your charged kWh to $0.12. How much consumption would you have to shift to a free period to make up for the increase in price? 

Current Scenario: 2000 kWh x $0.08 = $160

Proposed Scenario: Now we need to figure out how many kWh consumed at $0.12 equals $160 worth of consumption, and then subtract that number of kWh from 2000, to figure out how much energy you would need to shift into a free period in order to benefit. A little throwback to algebra class. 

.12x = 160
x = 160/.12
x = 1333 kWh
2000 kWh - 1333 kWh = 667 kWh 

So if you were able to shift more than 667 kWh every month into a free consumption period, then you would come out ahead. What might that look like?

A typical washing machine uses around 4.5 kWh for a load of laundry. So in this case, the plan might only make sense if you are a laundromat, and decide to only operate your machines at night, since it would take over 150 loads of laundry to make up the difference. However, if you're lucky enough to have a Tesla Model S, and can charge your car only during free periods, then you might want to hop on such a plan ASAP. 

Who Offers Time of Use Rate Options?

Some, but not all, retail electric providers offer Time of Use plans in Texas. These providers all offer time of use plans: Champion EnergyDirect EnergyTruSmart EnergyTXU Energy.

What Else Do I Need to Know About Time of Use Plans in Texas?

The rates advertised and the hours given for free consumption periods will change by plan, so make sure that you calculate out your own potential to realize savings yourself, because nobody knows your energy consumption habits better than you do. And if algebra class was a long time ago, feel free to copy what we did earlier.