How to Save Money With a ‘Time of Use’ Utility Plan

It’s not just eggs—all the basics we need to live our lives are getting more expensive, including the energy we use to run our appliances, heat our homes, and do just about everything else. The average monthly cost for electricity and gas is already over $200, so when your utility bill spikes, it’s often a cause for panic. After all, you can only do so much to cut down on your usage.

If you’re looking for ways to manage your utility bills, there is one option worth investigating. Check with your local utility company to see if it offers what’s known as a Time of Use (TOU) plan. While these plans require some adjustment and a healthy dose of personal discipline, they also the possibility of saving real money on your utility bills.

What’s a Time of Use utility plan?

Although a typical utility bill presents a flat rate for your usage, electricity demand varies greatly depending on the time of day. When demand is high (usually between 5 p.m. and 9 p.m., when people are getting home from work, firing up all their appliances, and warming up/cooling down the house) it’s more challenging for your utility company to provide sufficient energy. When demand is lower, it’s easier to generate enough energy to meet demand, so a TOU plan is designed to encourage customers to migrate their usage to off-peak hours by charging them a lower rate during those times.

Electricity will cost more during peak hours

It's critical to not e that most TOU plans will charge you a higher rate during peak hours—higher, that is, than the regular rate you'd pay without a TOU plan. If you go with a TOU plan, you'll not only not save money unless you commit to using less energy when demand is high, you'll potentially lose money.

The savings can be significant

If your utility company offers a TOU plan (not all do), this can lead to significant savings; although the exact amount you can shave off your utility bill will vary depending on the actual rates and your usage, you can potentially save up to 40% off your energy bill. But it will take some effort.

How to save with a Time of Use utility plan

The key thing about opting into a TOU plan is that you have to shift much of your energy use to those off-peak hours to see any benefit. The “off peak” hours that are cheaper under a TOU plan are set by the utility—you can’t pick and choose when you get the lower rate. You'll have to adapt your lifestyle to fit the plan in order to save money. That means running appliances like dishwashers, washing machines, and vacuums late at night. If you own an electric vehicle, you’ll have to charge it after peak hours. And you’ll need to adjust your thermostat so your HVAC system doesn’t run full-blast during peak hours.

While it might seem totally do-able to start doing laundry and vacuuming the house at 10 p.m., keep in mind you have to maintain this schedule shift for the long haul. If you lose your motivation after a few weeks and go back to a more convenient one, you won’t get the cheaper rate—as noted, you might even pay more than you would have if you hadn’t opted into a TOU plan in the first place.

Consider also the fact that you will be using at least some electricity during peak hours, and you’ll likely be paying a higher rate for it. You have to be able to shift enough of your usage into the off-peak periods to really save money, which means it's probably not going to work out if you work remotely or are a big homebody.

How to find a Time of Use utility plan

If you think a TOU plan might work for you, you can contact your current energy supplier to find out if they offer one. You can also check the U.S. Department of Energy’s website, which maintains a listing of utilities that offer some version of TOU on a state by state basis. Just because a program is listed, however, doesn’t mean it’s active: Some utilities have designated opt-in periods, and some are temporary and may not be accepting new customers, so you’ll have to contact the listed utility directly to discuss your options.

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