Understanding Time-of-Use Electricity Rates: Save Money by Shifting Load

Time-of-use (TOU) electricity pricing is the most underused money-saving tool in residential energy. Most homeowners know it exists; very few actually shift their load to capture the savings. The math is simple: electricity during peak hours costs 2–4× more than off-peak. Move your dishwasher, laundry, EV charging, and water heating to overnight, and you can save $300–$600/year with zero lifestyle cost.

Why utilities charge more during peak hours

Electricity can't be cheaply stored at grid scale, so generation must match demand in real time. During evening peak (4–9pm in most US regions), demand spikes as people come home, cook dinner, run AC, and turn on lights. Utilities meet this spike by firing up "peaker plants" — typically natural gas turbines that are expensive to run but fast to start. Overnight, demand collapses and base-load plants (nuclear, coal, hydro, wind) run underutilized.

TOU pricing passes those real-time generation costs to consumers. A peak rate of $0.42/kWh in California isn't a markup — it's roughly what the utility pays to generate that kWh. An off-peak rate of $0.18/kWh reflects the cheap overnight baseload. The spread exists because the underlying generation cost varies dramatically.

Typical TOU rate structures

Most US TOU plans have a 2-tier structure: peak (typically 4–9pm weekdays) and off-peak (everything else, plus all weekend). Some add a third "mid-peak" tier in the morning and early afternoon. The peak/off-peak spread varies:

• California (PG&E, SCE, SDG&E): $0.42 peak / $0.18 off-peak (2.3× spread)
• Massachusetts (Eversource, National Grid): $0.32 peak / $0.12 off-peak (2.7× spread)
• Hawaii (Hawaiian Electric): $0.55 peak / $0.30 off-peak (1.8× spread)
• New York (ConEd, NYSEG): $0.32 peak / $0.10 off-peak (3.2× spread)
• South Africa (Cape Town, Johannesburg): R5.10 peak / R1.90 off-peak (2.7× spread)

The wider the spread, the more worthwhile load shifting becomes. In New York or California with 3× spreads, TOU is almost always worth it. In Hawaii with only 1.8× spread, the savings are smaller but still positive.

What's shiftable, what isn't

Not every load can be moved. The trick is to identify the 60–80% of shiftable kWh and move them aggressively, while accepting that the rest will hit peak rates.

Easily shiftable (load it overnight): dishwasher (delay-start feature), clothes washer and dryer (run after 10pm or on weekends), EV charging (schedule in car or charger app), water heater (timer on tank), pool pump (timer), slow cooker, robot vacuum, battery charging for power tools.

Hard to shift (live with peak rate): cooking dinner, evening lighting, refrigeration (always on), AC during heatwaves, internet/WiFi, medical devices, computers in use.

The biggest win is usually EV charging. A typical EV uses 60–100 kWh/week. At a $0.30 peak vs $0.10 off-peak spread, that's $12–$24/week saved — $624–$1,248/year — just by charging 11pm–6am instead of 6pm–11pm. The EV charging app handles this automatically once configured.

The 80% shift assumption

Real-world studies (LBNL, EPRI) show that even with smart appliances and timers, households achieve 60–80% shift of technically-shiftable loads. The gap between theoretical and actual savings comes from forgetting to set a timer, needing a quick wash during peak, having guests who run the dryer at 7pm, and other real-life frictions.

Plan for 70% of theoretical maximum. If the calculator says you could save $500/year with perfect shifting, budget for $350/year in real savings. That's still a strong return on the zero-cost investment of setting a few timers.

When TOU doesn't pay

Three cases where TOU can actually increase your bill:

1. You're home all day with kids and cooking/cleaning loads fall during peak hours. The peak rate is unavoidable.
2. You live in a region with no real peak/off-peak spread (Pacific Northwest, parts of the US South) — TOU plans there often have a 1.2× spread, not worth the hassle.
3. Your household uses very little electricity overall (under 400 kWh/month). The absolute savings are too small to justify the cognitive overhead.

Before switching plans, run our Time-of-Use Optimizer with your actual usage. If the projected savings exceed $200/year, switch. If under $100, stay on flat-rate.

TOU + solar + battery = the full stack

If you have solar, TOU becomes even more valuable. Solar produces during midday off-peak (cheap), and you need power during evening peak (expensive). Without a battery, you sell midday excess at low off-peak rates and buy evening power at high peak rates — the worst of both worlds.

With a battery, you store midday solar and discharge it during evening peak. This is called TOU arbitrage, and in California and Massachusetts it's often the only economic case for residential batteries. The Battery ROI Calculator includes this scenario.

Getting started

Three steps to capture TOU savings this week:

1. Call your utility and ask if they offer a TOU plan. Most do, but you have to opt in.
2. Set up overnight scheduling for your EV charger, dishwasher, and washing machine. Most modern appliances have apps for this.
3. Install a $30 timer on your electric water heater to heat overnight only.

That's it. No new equipment, no upfront cost, just behavioral change and timer configuration. The savings show up on your next bill.