Time-of-Use to Combat Rising Energy Costs?

Customers are thinking they've survived the winter and the rise in heating costs but before they know it, it will be time to crank up the air conditioner to combat the sweltering heat of summer again.  Time-of-use (TOU) rates may alter customer behavior but will it be enough to minimize rising energy costs?  What about people who can’t change their time-of-use to match the lowest prices?  

“There’s no one size fits all, so we’ll all need information and advice to make sure we’re choosing a tariff that suits our needs,” acknowledged Gillian Cooper, head of energy policy for Citizens Advice.

In the UK, millions of households could soon be offered electricity prices that change every half hour.  Ofgem, the government regulator for the electricity and natural gas markets, will use smart meters to track usage information that could then be used to charge consumer more during peak times.  “As prices surge to record levels, smart meters can help us manage our energy use and make sure we get more accurate bills,” Cooper, said.

In the U.S., Colorado and California are both rolling out new time-of-use pricing systems. Xcel Energy officials say they’re trying to prevent overloads as they modernize their energy system toward a goal of carbon-free electricity by 2050.  However, the 18-month pilot program provided opportunities for consumers to save money each month.  The new plan will be completed by 2025 and will include all 1.5 million Xcel customers in Colorado.  “This is about planning for the future as we integrate more renewables into our systems,” said Hollie Velasquez Horvath, Minnesota-based Xcel’s regional vice president for community affairs and state relations.   “We have got to think about how we can partner with our customers,” she said.  As of March 1, Time of Use rates will determine the how much Colorado customers pay each month.  The three rates are Off-Peak, Mid-Peak and On-Peak.  Rates increase from one tier to the next. 

1. Off-Peak hours are before 1:00pm and after 7:00pm and will cost 9.9 cents per kWh
2. Mid-Peak hours are between 1:00pm - 3:00pm and will cost 13.6 cents per kWh in the winter (October - May) and 18.9 cents per kWh in the summer (June - September). 
3. On-Peak hours are between 3:00pm - 7:00pm and will cost 17.3 cents per kWh in the winter and 27.9 cents per kWh in the summer. 

In California, Pacific Gas and Electric Company (PG&E) will automatically move customers to a time-of-use rate plan in April.  “TOU rates help Californians take advantage of less expensive, cleaner and more plentiful electricity during periods when a greater share of renewable energy is flowing through the grid. Combined with energy efficiency, electrification, and demand response programs, TOU helps customers reduce energy costs and their carbon footprints by using appliances when more emissions-free electricity is available,” said Alejandra Mejia Cunningham, Building Decarbonization Advocate, NRDC.

Summer will be here soon. “Air-conditioning is the biggest energy suck that our customers have,” said Hollie Velasquez Horvath of Xcel.  TOU rates could curb usage, lower utility bills and increase energy savings.