Time-of-use (TOU) energy plans charge discounted electricity prices to encourage you to shift your energy usage and potentially save on your energy costs. Some time-of-use plans even offer free electricity. But can time-of-use plans actually help you save, or are they a gimmick that may end up costing you?
First, what is a TOU plan? While technically a fixed-rate plan, a TOU plan charges different rates during different periods. These rate changes are a direct response to demand on the power grid. The most common TOU plans offer discounted rates during periods of low demand, typically on nights and weekends, while charging high rates during high-demand periods.
Time-of-use plans encourage customers to shift their energy usage to periods when demand is low, helping to balance supply and demand and reduce strain on the power grid. Let’s explore how a time-of-use plan works and whether it is a good fit for you.
Time-of-Use Rate Structure
Time-of-use plans divide days or weeks into on-peak and off-peak times. Typically, periods of high demand include early mornings, late afternoons and early evenings. Meanwhile, nights and weekends are generally the low-demand or off-peak periods.
Typically, providers will charge a very low rate during off-peak periods, sometimes even offering $0 energy on nights and weekends. On the other hand, providers will charge very high rates — often well over 20 cents per kilowatt-hour (kWh) during peak periods.
Reliant Energy, TXU Energy and Rhythm Energy all offer time-of-use energy plans, which you may want to consider.
Peak vs. Off-Peak: What’s the Difference?
Peak periods are times when the power grid experiences the highest demand, straining the electrical infrastructure. Generally, all daytime hours are peak hours. However, some providers specifically consider early morning peak hours because most customers use more power in the mornings when getting ready for work and school. Similarly, companies also consider late afternoon and evening peak hours since all residents are usually home and using appliances.
Note that peak and off-peak hours may change with seasonal variations, as energy consumption patterns are different in different seasons. For example, a home may use more energy in the early evenings of summer by running their air-conditioner for longer.
Why Energy Companies Offer TOU Plans
Energy companies offer TOU plans to encourage homeowners to shift their energy consumption from peak to off-peak hours. The main reason for this is demand-supply balancing. More uniform energy consumption throughout the day or week helps generate and transmit power more efficiently and predictably.
Grid Benefits and Energy Management
Managing electrical load in a location to balance supply and demand is essential for the smooth functioning of a grid. For example, running power generation systems on part load during off-peak hours affects the power generation efficiency. On the other hand, high power demand can put a strain on limited generation facilities, threatening grid stability.
Load management is also important in a grid that is integrating more renewable energy sources. Renewable energy has daily and seasonal variations, and high-generation periods may not always match high-consumption periods.
Additionally, areas with extreme weather events are more susceptible to demand-supply woes. Texas is a noteworthy example, having experienced severe power outages when the 2021 winter storm disturbed the state’s demand-supply balance.
Comparing TOU Plans with Standard Rate Plans
Time-of-use plans charge different electricity rates at different hours. In comparison, a standard, fixed-rate plan will have a constant rate regardless of the time of the day or day of the week.
If you use a standard, fixed-rate plan, your electricity bill will not change even if you shift your energy usage from one period to another. A TOU plan can see large variations for the same amount of energy usage based on when you use said energy.
Sample Bill Comparison
Let us compare an actual fixed-rate plan with a TOU plan to see how the pricing differs with periods and the resulting potential savings. Below are the rates for two plans from Rhythm Energy, a reputable Texas electricity provider. In the table below, we compare the energy charge of the Digital Discount 12, a straightforward fixed-rate plan and the PowerShift 12, a time-of-use plan.
| Time Period | Digital Discount 12 Rate per kWh | PowerShift 12 | Potential Savings per kWh |
|---|---|---|---|
| 6 a.m. – 9 a.m. (on-peak) | 9.196 cents | 12.619 cents | -3.423 cents |
| 9 a.m. – 6 p.m. (off-peak) | 9.196 cents | 4.951 cents | 4.245 cents |
| 6 p.m. – 10 p.m. (on peak) | 9.196 cents | 23.0 cents | -13.804 cents |
| 10 p.m. – 6 a.m. (off-peak) | 9.196 cents | 4.951 cents | 4.245 cents |
Rates are based on 1,000 kWh of usage per month and are accurate as of February 2025. Note that these energy charges don’t include the utility company delivery fees. This table is just a comparison of the provider’s energy charge for each plan.
The time-of-use plan analyzed above offers savings in two time periods, making up 17 hours of the day. However, you should note that these discounted periods occur during times of low power demand when most people are likely to be using the least amount of energy. During high-demand periods — when the average Texan is likely to use more energy — the TOU rate is significantly more expensive than the fixed-rate price. This means you’re spending significantly more during high-demand periods while enjoying moderate discounts during low-demand periods.
To take advantage of the discounts offered by TOU plans, you may need to adjust how and when you use large portions of energy. For example, scheduling laundry and dishwashing to occur largely during the discounted periods may help you save. However, rescheduling when you run your air conditioning unit may prove more challenging, especially during the Lone Star State’s infamously warm summers.
Simply put, TOU plans may benefit you if your energy usage occurs largely during off-peak hours but can result in very high bills if you use most of your electricity during peak hours.
Maximizing Savings with TOU Plans
Consuming large amounts of electricity during peak-demand periods doesn’t just reduce your savings, it can also cost you significantly more money. This is because providers tend to set very high on-peak electricity rates to offset the losses incurred by the discounted hours. If you choose a TOU plan, you can maximize your savings by shifting as much of your usage as possible to off-peak hours.
However, it’s noteworthy that it may be virtually impossible for you to shift all of your energy use to the discounted hours. Shifting significant amounts of energy is difficult due to the overlap of peak versus off-peak times and the standard schedule for appliance use. For example, most homes will run their air conditioning or heating units during peak hours, regardless of their plan type. Keeping your home at a comfortable temperature in summer or winter simply requires running your HVAC unit. Additionally, you’ll find that you may need to cook meals during on-peak hours. However, you may be able to save if you’re strategic about your usage.
Smart Usage Strategies for TOU Plans
Still, you may be able to enjoy low rates by strategically using energy on a TOU plan.
- Do your laundry at night, as your washer-dryer combination uses some of the highest energy in your home.
- Charge your electric vehicle (EV) at night for discounted and uninterrupted charging and a high battery level each morning.
- Many appliances, such as dishwashers, allow you to set a timer for switching on. You can time these appliances to turn on at night.
- Unplug or switch off energy-hungry devices that consume energy when not in use, including game consoles, computers, coffee makers and more.
- You can also install a smart battery that charges during off-peak hours when power costs are low. Then, you can use it to power your appliances during peak hours, essentially allowing you to use ample energy during peak hours at a low rate.
Is a TOU Plan Right for You?
A time-of-use plan can be right for you in two scenarios — if your energy consumption during peak hours is low or if your energy usage patterns are flexible. If your usage is already low during peak hours, you won’t have to worry about high bills with a TOU plan. Similarly, if you can easily move around the time periods of the appliances you want to run at home, you will be able to save with a TOU plan. However, if you use large portions of energy during peak hours, a time-of-use plan may not suit your needs.
Ideal Customer Profiles for Time-of-Use Plans
As time-of-use plans tend to offer discounts at night or on the weekend, the ideal customer is someone who is away from home during high-cost weekday hours.
For example, suppose you’re a young professional living in a relatively small apartment in Rice Village in Houston or Deep Ellum in Dallas. With a busy work schedule and a full social calendar, you may only be home after a late dinner. And because you’re out the door early to get a jump on the day, you can make sure you’re not using much electricity during peak hours. Additionally, the small size of your urban apartment means your air conditioning unit doesn’t have to work hard during paid hours to keep your apartment comfortable.
Whether you’re living in a loft in the Big D or a one-bedroom apartment in H-Town, you may benefit from a time-of-use plan.
To compare time-of-use energy plans in your area, punch in your ZIP code below and compare plans from top providers.
Frequently Asked Questions About Time-of-Use Plans
What happens if I can’t avoid using electricity during peak hours?
If you cannot avoid using electricity during peak hours, you will probably see high power bills, as peak hour rates can often be multiple times the off-peak rates. In such a case, we recommend switching energy plans and finding a straightforward fixed-rate plan that offers predictable energy costs no matter what time of day it is.
How do holidays and weekends affect TOU rates?
Many time-of-use electricity plans offer discounted rates on weekends. Meanwhile, some providers consider holidays to be off-peak days because so many businesses are closed, causing demand to drop. However, you should check your plan’s EFL or even contact the provider to verify the discounted periods on specific holidays.
Can I combine a TOU plan with solar panels?
Yes, you can combine a TOU plan with solar panels. Additionally, you can combine your solar system with a solar battery to store energy for use at later times, which can help you further offset your usage during peak-demand periods. However, if you have solar panels, a solar buyback plan may better suit your needs than a time-of-use plan. That said, some solar buyback plans of time-of-use offerings.
How do seasonal changes affect peak hours?
Seasonal changes affect the energy consumption patterns of electricity customers, which, in turn, affects the peak and off-peak hour times assigned by the electric providers. For instance, the usage of heating devices in winter may increase peak hours during the morning. Meanwhile, some time-of-use plans offer discounted rates for the duration of specific seasons. Check your plan’s terms of service to determine its discounted hours.
