Ultimate Guide to Time of Use (TOU) Rates: When is Electricity Cheapest and How to Slash Your Bills?

According to the U.S. EIA, average residential electricity prices rose by about 18% from 2024 to 2026, pushing many homeowners to look for smarter ways to cut energy bills.

At the same time, growing grid pressure has led over two-thirds of major U.S. utilities to adopt Time-of-Use (TOU) rates—where electricity prices change by time of day.

If you assume power costs the same whenever you use it, TOU pricing changes everything. This guide explains how TOU rates work, when they save money, and how to take advantage of them with minimal effort.

What Are Time-of-Use (TOU) Rates?

Time-of-Use (TOU) rates are a dynamic pricing model where electricity costs vary based on the time of day. Peak hours charge more due to high demand, while off-peak times offer lower rates to encourage efficient usage.

Why Do Utility Companies Use TOU Rates?

Utility companies implement Time-of-Use tariff structures to address core grid challenges while creating long-term value:

Balance Grid Load During High-demand Windows

The greatest strain on grids falls during electricity peak hours. TOU pricing incentivizes customers to shift non-essential usage to off peak electricity times, smoothing out overall demand and reducing outage risks.

Cut Unnecessary Infrastructure Costs

Building extra power plants or upgrading grids solely to meet short daily peak demand is costly and inefficient. By flattening peak load with TOU rates, utilities avoid passing these excess capital expenses to customers.

Accelerate Renewable Energy Integration

Most solar and wind generation peaks during midday or off-peak periods. TOU rates encourage using power when clean energy is abundant, reducing reliance on fossil-fueled backup systems to support a greener grid.

For regional providers like PG&E, their TOU rates are tailored to local demand rhythms, with pricing aligned to pge peak hours to better match the unique grid needs of their service area.

TOU Rates vs. Flat Rates: Head-to-Head Comparison

TOU rates offer flexibility with lower off-peak prices but variable costs tied to usage timing. Flat rates provide stability and predictable billing regardless of when you use power.

When TOU Rates Work Better

TOU shines for flexible schedules—like night owls charging EVs during off-peak hours or remote workers avoiding peak evenings—for potential savings of 20-30%. Flat rates suit consistent daytime users or those prioritizing simplicity over optimization.

How TOU Rates Change With the Seasons

TOU schedules aren't static; they adapt seasonally to match shifting demand patterns and grid stress.

Summer shifts extend peak time electricity into hot afternoons and evenings (often 4-9 PM), when AC usage surges—pushing the best time to use electricity to cooler mornings or late nights for big loads like dishwashers.

Winter adjustments typically move peaks to chilly evenings (5-8 PM) driven by heating, freeing up daytime slots for lower rates on EVs or laundry.

This dynamic structure helps utilities manage on-peak and off-peak hours electricity efficiently, varying by provider and region. Check your plan for exact time of use tariff calendars.

How to Maximize Savings With TOU Rates

Shift high-energy tasks to off-peak windows for immediate 20-40% savings on your bill.

• Schedule laundry and dryers for midnight-6 AM slots using smart timers.

• Charge EVs overnight during the cheapest and best time to use electricity, avoiding peak-time electricity surcharges.

• Run dishwashers, ovens, and pools in early mornings or late nights.

How Home Batteries Make TOU Pricing Even More Valuable

Batteries enable "arbitrage": charge during low-rate off-peak hours, then discharge stored power through TOU rate peaks. Systems like SolaX batteries can cut bills by 50% or more, turning time-varying time-of-use tariffs into a profit strategy for solar owners.

FAQ

1. Are TOU rates always better than flat rates?

No—TOU saves money if you shift usage to off-peak (up to 30%), but flat rates offer predictability for inflexible schedules.

2. What's the cheapest time of day for electricity?

Typically midnight-6 AM and midday (pre-peak), varying by provider; check your time of use tariff for the best time to use electricity.