Time-of-Use Electricity Rates Guide

For many people, your electric bill used to be simple. You paid one flat rate per kilowatt-hour, no matter when you used power. That model is disappearing. A growing share of US utilities now bill on time-of-use (TOU) rates, charging different prices depending on the hour of the day, the day of the week, and sometimes even the season or specific weather events.

TOU pricing can save money for households that shift their energy use. It can also cost more for households that don’t. This guide explains how TOU rates work, why utilities use them, and what a homeowner can actually do to take advantage of them.

What Is a Time-of-Use Electricity Rate?

A time-of-use rate is an electricity pricing plan where the per-kWh price you pay changes based on when you consume power. Most TOU plans define a small number of daily price windows:

Off-peak — the cheapest hours, typically overnight (e.g., midnight to 6 AM).
Mid-peak — moderate prices during most of the day.
On-peak (or “super-peak”) — the most expensive hours, typically when household demand is highest (often 4 PM to 9 PM on weekdays).

The exact schedule and price ratio vary by utility, but the spread between off-peak and on-peak is often 2x to 4x, and in some markets, much wider. In California, for example, some on-peak rates are over $0.50/kWh while off-peak rates sit under $0.20/kWh. In New York City, some 2025 residential TOU plans went further: overnight rates ran under $0.09/kWh, daytime mid-peak hours sat around $0.43/kWh, and a super-peak window from 2 PM to 6 PM topped $1.10/kWh — more than a 12x spread between the cheapest and most expensive hours of the same day.

Why Utilities Use TOU Rates

Electricity is produced and consumed in real time, and not all hours are equal on the grid. During peak hours, utilities fire up expensive “peaker” plants to meet demand. In the middle of the day, solar generation often exceeds local demand, making electricity cheap and sometimes briefly negative on the wholesale market.

TOU rates pass this cost variability through to end customers. The goal is to:

Reduce peak demand — shifting load off expensive peak hours reduces the need for new power plants and transmission.
Reward flexibility — customers who can shift when they consume energy get lower bills.
Integrate renewables — moving load into midday solar hours uses clean power that would otherwise be curtailed.

How Much Can You Actually Save?

Savings depend on two things: your utility’s price spread and how much of your energy use is shiftable. As a rough benchmark:

A household that makes no changes on a TOU plan typically pays 5–15% more than they would on a flat rate, because typical household usage peaks during on-peak hours.
A household that actively shifts HVAC, EV charging, and water heating can cut their bill by 10–25% compared to a flat-rate plan.

The swing between “no action” and “optimized” can easily be several hundred dollars a year for a typical home.

What’s Worth Shifting?

Not every load is worth moving. The loads that pay off the most are the ones that:

Use significant energy (a few kWh per day or more).
Have storage or thermal mass so the exact timing doesn’t matter to you.
Can be scheduled in advance without manual effort.

The best candidates in a typical home:

HVAC (heating and cooling) — your house is a thermal battery. Pre-cooling or pre-heating during off-peak hours and letting the temperature drift slightly during on-peak hours can cut HVAC costs meaningfully while staying within your comfort band.
EV charging — almost always shiftable to overnight. A full EV charge is often the biggest single energy use in a home, and charging at 2 AM instead of 7 PM can save significant dollars per charge.
Water heating — heat water off-peak, use it throughout the day.
Home batteries — charge off-peak or from midday solar, discharge during on-peak.
Dishwashers and dryers — smaller impact per load, but easy to schedule.

The Practical Problem

Understanding TOU rates is easy. Actually responding to them every day is hard. To optimize manually you’d need to:

Know your utility’s exact TOU schedule (they change periodically).
Check tomorrow’s weather forecast to determine when pre-conditioning makes sense.
Adjust your thermostat, EV charger, and water heater every 15 or 30 minutes.
Calculate your home’s thermal characteristics and re-tune everything when seasons change.

That’s why most people on TOU rates don’t capture most of the available savings. You can feel this for yourself in our interactive game. Try hand-scheduling a day’s worth of appliances against a TOU rate and see how close you can get to the optimal answer.

What Automation Changes

Software can do this work. A cutting-edge home energy management system reads your utility’s rate schedule, pulls tomorrow’s weather forecast, learns your home’s thermal behavior over time, and generates a schedule for each device that shifts load to cheap hours while respecting your comfort preferences. You set the goals once — temperature range, EV departure time, battery reserve — and the system handles the daily scheduling.

Hungry Machines is a home energy management platform built on Home Assistant that does exactly this. It generates nightly optimization schedules for your HVAC, EV charger, home battery, and water heater, automatically shifting consumption to cheaper time-of-use hours and coordinating your devices to give you the best savings.

Frequently Asked Questions

What is a time-of-use electricity rate?

A time-of-use (TOU) electricity rate is a utility pricing plan where the price per kilowatt-hour changes based on the time of day. Off-peak hours (typically overnight) are cheapest, on-peak hours (typically late afternoon and early evening on weekdays) are most expensive, and mid-peak hours are in between.

How do I know if I’m on a time-of-use rate?

Check a recent electric bill or log into your utility’s online account portal. The bill will list your rate plan by name — plans called “TOU,” “Time-of-Day,” “Smart Pricing,” or “Peak/Off-Peak” are all TOU-style rates. Flat-rate plans typically show a single $/kWh figure regardless of time.

Do I save money automatically on a TOU rate?

No. TOU rates only save money if you shift energy use away from on-peak hours. Households that don’t change behavior often pay more on a TOU plan than on a flat rate, because typical usage peaks during on-peak evening hours.

What’s the cheapest time to use electricity?

On most TOU plans, overnight hours (roughly midnight to 6 AM) are cheapest. In regions with heavy solar generation, a second low-price window often appears in the middle of the day (roughly 10 AM to 3 PM). If you have your own solar panels, preferentially using your own solar power is often best. Check your specific plan — utilities vary.

Is it worth switching to a time-of-use rate?

It depends on your ability to shift load. If you have appliances like those listed above (HVAC, EV, battery) and can control them, TOU rates can save meaningful money. If your usage is fixed (a small apartment with no flexible loads), a flat rate is often better. Most utilities allow you to switch plans once per year.

Does shifting HVAC usage sacrifice comfort?

Not if done correctly. A well-tuned home energy management system pre-conditions your home during off-peak hours and lets temperature drift within a comfort band you set. Most households don’t notice the difference once the thermal model is calibrated.

Can a home battery make TOU arbitrage easier?

Yes. A home battery can charge during off-peak hours (or from rooftop solar) and discharge during on-peak hours, which directly exploits the price spread. Combined with automated scheduling, batteries typically pay back faster on TOU rates than on flat rates.

Getting Started

If you’re on a TOU rate and want to capture the savings without the daily effort, Hungry Machines can help. Install the Home Assistant integration, connect your devices, set your preferences, and the system generates optimized schedules nightly. Learn how it works or contact us with questions.