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In a standard electricity plan, you pay the same rate for your electricity regardless of the time of day. But with time-of-use (TOU) plans, the rate you pay for electricity depends on the time energy is drawn from the grid. You''ll pay different amounts based on a schedule developed by your utility company of peak hours, off-peak hours, and in some cases, super off-peak or partial-peak hours.
It''s becoming increasingly popular for utilities to offer TOU plans to their residential customers. These types of rate plans often make adding solar panels or a battery to your home very worthwhile.
Your electric bill is based on a charge per kilowatt-hour (kWh), so you''re billed for actual electricity pulled from the grid. Under TOU rate plans, your utility charges you more for electricity usage during afternoon "peak" hours when the electricity demand is higher, also known as peak demand. When demand is lower, the cheapest electricity can be found during "off-peak" hours.
Energy is usually cheapest at night, regardless of region or time of year. But the exact timing depends primarily on your location and the off-peak periods utilities operate. Many rate plans will depend not only on the hours you''re using electricity but also on the season. Summer rates are often higher than winter rates because of energy-intensive air conditioning systems running during hot days.
On the East Coast, it''s hottest after 2 pm, so you''ll usually need air conditioning during the summer months––so it isn''t surprising that the peak hours for this region are often from 2 in the afternoon until around 6 in the evening. However, in winter, peak hours change to the early morning as homeowners and businesses turn up the heat so that living and work spaces are comfortable.
Generally, you can expect peak hours to start sometime in the afternoon and go into the evening when people return home after work and use more lights and appliances. And depending on the season and where you live, you''ll usually pay higher rates on weekdays during certain hours.
Some utility companies offer more than one time-of-use rate plan or option. These TOU rate plans may have different hours classified as peak hours or may even include some "partial-peak" hours that charge less than peak rates but more than off-peak rates.
Usually, power companies charge off-peak use rates during holidays and weekends, such as Memorial Day, the 4th of July, Labor Day, Thanksgiving, Christmas Day, and New Year''s Day. If you''re on a TOU plan, there may also be a demand charge based on the highest amount of energy used, regardless of if it''s during peak or off-peak hours.
In some cases, TOU rate plans can cost you more in the long term, but they also offer significant opportunities to save money. Before you opt into a TOU plan, ask yourself the following questions:
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