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Cut Energy Costs with Time-based Electricity Rates

Dec 13, 2013

There’s a lot of great information out there on what you can do to reduce your home energy costs. Some of the more common tips include turning off lights in unused rooms, unplugging electronics not in use, and so on. But what a lot of people don’t know is that many utility companies are trying to help their customers cut energy costs by offering them time-based electricity rates.

How Do Time-based Electricity Rates Work?

Time-based electricity pricing is a strategy where utilities vary the price depending on the time-of-day usage.

There are a number of options that many utilities offer their customers who choose to go the time-based electricity rate route.

  • Time-of-use pricing (TOU pricing): Electricity rates are set for a specific time period, on an advance basis. The prices will typically not change more than twice a year. Consumers only pay for energy used during these periods at pre-established prices, allowing them to control usage and costs accordingly.
  • Critical peak pricing: TOU pricing is in effect except for certain peak days, when prices may reflect the costs of generating or purchasing electricity at wholesale prices.
  • Real-time pricing (also known as dynamic pricing): Electricity prices could change on an hourly basis, and sometimes even more often than that. The price is provided to the user on an advanced basis that reflects the utility’s cost of generating or purchasing electricity at wholesale prices.
  • Peak load reduction credits: These are geared towards customers who need large loads and enter into pre-established peak load reduction agreements that reduce a utility’s planned capacity obligations.

According to many surveys, demand for this type of electricity pricing is on the rise with consumers. Time-based electricity rates provide an opportunity to cut energy costs through control of how electricity is consumed. Consumers can save money, energy and help the environment. No wonder more people are asking for them.