Time-of-Use Electricity Rates Explained: How TOU Plans Work and Who Saves

Time-of-use (TOU) electricity rates charge different prices for electricity depending on when you use it: higher during peak hours, usually weekday late afternoons and early evenings, and lower during off-peak hours such as overnight. The peak and off-peak prices are set in advance, so you can lower your bill by moving flexible use, like EV charging, laundry and dishwashing, to cheaper hours.

Whether a TOU plan helps you depends on how much of your usage you can actually shift. Here is how these rates work, how they differ from other time-based plans and how to tell if one fits your home.

How time-of-use rates work

With a standard flat rate, you pay the same price per kWh at any hour. With a TOU rate, the day is split into blocks. According to the U.S. Department of Energy's SmartGrid.gov overview, TOU prices apply to broad blocks of hours, such as on-peak and off-peak periods, and "the price for each period is predetermined and constant."

Why do utilities price electricity this way? The U.S. Energy Information Administration explains that wholesale electricity costs change minute by minute, and demand is usually highest in the afternoon and early evening. Most customers pay seasonal average rates and never see those swings, but some utilities offer time-of-day pricing to encourage conservation and reduce peak demand. The American Public Power Association puts it simply: "The cost of delivering electricity through the grid varies depending on how much people are using at a given time."

Typical TOU periods

Every utility sets its own schedule, so always check your rate's exact hours. The APPA notes that peak prices often fall on weekdays in the late afternoon or early evening; its example uses 4 p.m. to 9 p.m. as the peak window. Some plans add more tiers, such as a short "super peak" or a lowest-price overnight period, and rates can also differ between weekdays and weekends or between seasons. The EIA notes electricity prices are usually highest in summer, when more expensive generation is added to meet demand.

Types of time-based electricity rates

TOU is one of several time-based rate designs. The SmartGrid.gov definitions are summarized below.

Rate type	How it works	Prices known in advance?
Time-of-use (TOU)	Fixed prices for set blocks of hours, such as on-peak and off-peak.	Yes
Critical peak pricing (CPP)	Prices are raised substantially during a limited number of called events, when wholesale prices are high or the grid is stressed.	Event prices are set, but event days are called as needed
Critical peak rebates	Your price stays the same, but you get a predetermined credit for reducing use during called events.	Yes
Variable peak pricing	Peak hours are set in advance, but the peak price varies with utility and market conditions.	Partly
Real-time pricing (RTP)	Prices generally apply hourly and track market conditions.	No

All of these depend on metering. SmartGrid.gov notes that older meters only recorded total usage, which limited customers to flat or tiered rates, while smart meters can record usage as often as every 15 minutes, making time-based pricing possible.

Time-of-use vs. flat and tiered rates

Flat and tiered rates charge by how much electricity you use, not when. SmartGrid.gov notes that these designs do not reflect how the cost of producing electricity varies by hour, day or season, which is the gap time-based rates are meant to close. With a flat rate, every kWh costs the same. With a tiered rate, the price changes once your monthly usage passes set thresholds. With a TOU rate, the price changes with the clock. Some utilities combine approaches, so read your rate schedule carefully to see which charges apply to your plan.

How common are TOU rates?

They are widely available. The APPA, citing EIA data, reports that as of 2024 more than 620 utilities, including 230 public power utilities, offered a TOU rate. Some utilities make TOU optional and others enroll customers by default with the option to leave, so check what your utility offers and whether you can switch back.

Can a time-of-use plan lower your bill?

It can, but it is not guaranteed. The APPA notes that customers who shift use to off-peak hours can reduce their bills, while customers who cannot shift usage may see higher bills. A meta-analysis by Resources for the Future cited by the APPA found that, on average, TOU rates cut on-peak usage by about 3% and raised off-peak usage by about 1%, which shows that most households shift only a modest amount.

Automation makes a bigger difference. In a U.S. Department of Energy study of utility time-based rate pilots, customers with programmable communicating thermostats generally reduced peak demand by 27% to 45%, compared with -1% to 37% for those without them.

The same DOE study looked at how customers enroll and stay on these rates. Where customers were enrolled by default with the option to leave, enrollment was about 93%, compared with 24% when customers had to sign up themselves. Retention was similar either way, at about 91% for default enrollment and 92% for customers who opted in. In other words, once people try a time-based rate, most stay on it, but that does not mean every household saves money.

How to decide if TOU is right for you

1. Get your rate details. Find the peak and off-peak hours and prices for each season from your utility's rate schedule.
2. Look at your usage pattern. If your utility offers hourly or 15-minute data from a smart meter, check how much of your use falls in the peak window.
3. List what you can move. EV charging, dishwashers, clothes washers and dryers, and pool pumps are common candidates. Cooking dinner and evening lighting usually are not.
4. Run both scenarios. Price your current usage on the flat rate and on the TOU rate, then again assuming you shift the flexible loads. Our electric bill calculator can help with the math.
5. Check the exit terms. Find out whether you can return to your previous rate and how soon.

Ways to shift usage to off-peak hours

• Charge your EV overnight. The Alternative Fuels Data Center notes that some utilities offer residential time-of-use rates that can lower EV charging costs. Most EVs and smart chargers let you schedule a start time. See how much it costs to charge an electric car at home.
• Delay the dishwasher. The DOE's Energy Saver tips on time-based rates give the example of running your dishwasher late in the evening. See what a cycle uses on our dishwasher cost page.
• Move laundry. Running the washer and dryer outside peak hours can help on TOU plans, especially if you can start loads later in the evening or on weekends when those are off-peak on your plan.
• Use a smart thermostat. A programmable or smart thermostat can schedule heating and cooling around the peak window; in the DOE pilots above, customers with these thermostats cut peak demand the most.
• Use timers and smart plugs. The APPA notes that smart appliances, EVs and home batteries can be programmed to move usage to the lowest-cost hours.

TOU rates and solar or batteries

If you have solar panels, a TOU rate affects how much your exported and self-used electricity is worth, because peak hours often fall in the late afternoon and evening when solar output is falling. A home battery can store energy to use during the peak window. How this works depends heavily on your utility's net metering or export rules, so check those before deciding. Our solar payback by state pages are a good starting point.

Next steps

Find your utility's TOU schedule, then compare it with your current plan using the electric bill calculator. To see how your state's prices compare, visit our electricity rates by state hub. With the average US residential price at 18.16¢ per kWh in August 2026, even a modest shift of flexible loads is worth estimating before you switch.