The Importance of Time of Use Rates: Why Shifting Energy Use in the Summer Makes Economic and Environmental Sense

With summer in full swing, my mind often drifts to all of the outdoor activities that I can’t wait to get outside and enjoy: hiking in the mountains, riding my bike around town, and swimming in the Yuba and American rivers. While my mind is wandering towards the outdoors, I remind myself how important it is to not forget about the energy use back in our homes and businesses.

In the summer months, the costs for PG&E of procuring and delivering electricity can rise to over $15 per kWh ($15,000 per MWh) to meet peak demand. Spoiler alert, this is a lot higher than the typical 20-40 cents per kWh that we pay for electricity. This large gap between the costs of delivering electricity and the price paid by customers drives up the average per-kWh costs for all customers. These peak periods of cost are generally in the summer months and usually coincide with the time period of 4-8pm, as low-cost solar PV electricity ramps down and people return home from work and start using their appliances and running their air conditioners.EUC Graph 1 PA Blog

For this reason and others in 2015, the California Public Utilities Commission (CPUC) directed the investor owned utilities like PG&E to transition customers to a default of Time of Use (TOU) rates, which are higher during peak hours of the day and lower during off-peak hours, from the traditional monthly fixed charge and tiered per-kWh rate that are the same regardless of when the electricity is used. The CPUC also required the utilities to run opt-in pilot programs to develop insights that would help guide the utilities implementation of TOU rates. The PG&E pilots which ran from 2016 through 2017 found that only 5% of customers on the pilot rate opted out of the program to return to traditional tiered rates and on average customers reduced their average summer peak load by 5.3%.

This significant reduction in electricity use during peak time periods resulted in reduced electricity costs for the customers and savings for all customers through the reduction in procurement and delivery costs for the utilities. Similar pilot studies have found even greater reductions in peak use by increasing the differential between peak and off-peak prices. By reducing your electricity use during these peak periods or shifting your electricity to off-peak periods, you will also be doing your part to help reduce the carbon emissions associated with electricity generation in California. Peak period electricity use coincides with the most polluting natural gas peaker plants required to meet the higher than normal demand while off-peak periods coincide with greater renewables on the grid.EUC Graph 2 PA blog

As you think about your energy use this summer, keep in mind these tips previously shared by Justine Quealy on her blog post earlier this year:

  • Turn off non-essential lighting and electronic devices between 4pm-9pm to ensure you’re using as much clean energy as possible.
  • Use timers to run appliances like dishwashers, washing machines, and electric water heaters during off-peak hours. Install timers on indoor and outdoor lighting, water recirculation pumps, and pool and spa pumps.
  • Adjust your thermostat to not only save energy, but also to pre-cool or pre-heat your home outside of peak demand hours.
  • Take advantage of daylight and do any household chores and activities that you can during the day before 4 p.m. when energy is cleaner and less expensive.
  • Charge your battery-powered devices over night after the peak demand period ends at 9pm.

Finally, SBC’s Climate & Energy team has funding available through our Sierra Nevada Energy Watch Local Government Partnership program to provide energy planning assistance to any public agency within the PG&E service territory in our region. Our no-cost, energy planning assistance includes preparation of a baseline greenhouse gas emissions Inventory or Re-Inventory of emissions, development of an Energy Action Plan with detailed strategies and actions that can be implemented in the short and medium term to reduce energy use and costs, and benchmarking of the energy performance of an agency’s largest facilities in Energy Star Portfolio Manager. Our experienced team will also identify early action opportunities to reduce energy use as well as incentive programs and financing options that can be utilized to reduce the upfront costs associated with the projects.

For more information on our climate & energy services, please contact our Climate & Energy Program Director, Paul Ahrns at or 530-559-9505.