On a flat commercial rate, a kWh costs the same at 3 a.m. as at 5 p.m. On a time-of-use rate, it does not. The clock becomes part of the price.
Time-of-use rates exist because the cost of supplying power changes through the day and the year. Utilities price the busy hours higher and the quiet hours lower, and they expect some customers to move load from one to the other. Whether a TOU rate suits a site depends almost entirely on when that site uses power.
How a time-of-use rate works
A TOU schedule divides the calendar into periods and gives each its own price.
- On-peak: the busiest hours, usually weekday afternoons into early evening. The highest price.
- Off-peak: nights, weekends and often holidays. The lowest price.
- Shoulder or mid-peak: some schedules add a middle period on either side of the peak.
- Seasons: most schedules price summer differently from winter, and some move the peak window between seasons.
The exact hours, days, holidays and seasons are in the schedule. Read them from the current tariff; they differ between utilities and change over time.
Energy periods and demand periods
TOU pricing can apply to energy, to demand, or to both.
TOU energy prices kWh by period. A site pays more for each kWh used on-peak.
TOU demand prices kW by period. Some schedules charge demand only on the highest interval inside the on-peak window. Others charge a smaller demand charge on the all-hours peak and a larger one on the on-peak peak.
This distinction matters. A site whose highest peak happens at 6 a.m., outside the window, may pay much less demand on a schedule that counts only on-peak hours. The National Renewable Energy Laboratory notes that demand charges are typically based on the highest average electricity usage in a defined interval, usually 15 minutes, during a billing period. On a TOU schedule, the question becomes which 15 minutes count.
Who tends to fit
Sites that run most of their load outside the peak window are the usual candidates.
- Warehouses and distribution centers with night shifts.
- Offices that empty out by late afternoon.
- Sites with EV fleets that charge overnight.
- Cold storage with room to pre-cool before the peak.
- Sites whose busiest hours happen to miss the window.
Sites that tend to struggle are those whose busiest hours sit inside the window: a restaurant whose dinner service starts in the late afternoon, or a store with heavy cooling on summer afternoons. That is not a rule. It is a reason to run the numbers carefully before switching.
Read your interval data first
You cannot judge a TOU rate from monthly bills. You need interval data: the 15-minute or hourly record from the meter. Most utilities provide it for interval and smart meters, often as a download or a Green Button file.
With 12 months of intervals, calculate two things for each site:
- The on-peak share of kWh. What fraction of the site’s energy falls inside the peak window, by season.
- On-peak demand against all-hours demand. How high the site peaks inside the window compared with its overall peak.
Those two numbers tell you most of what the bill will do on a TOU schedule. Our utility billing glossary defines interval data, TOU, load factor and the other terms these files use.
The break-even, worked out
Here is the energy side for one site, with illustrative round prices. Check your current tariff for real ones.
In this example, a site uses 50,000 kWh a month. On a flat schedule at $0.10 per kWh, energy costs $5,000. On a TOU schedule, on-peak energy costs $0.20 per kWh and off-peak costs $0.07.
| On-peak share | On-peak cost | Off-peak cost | TOU total | Flat total |
|---|---|---|---|---|
| 20% | $2,000 | $2,800 | $4,800 | $5,000 |
| 35% | $3,500 | $2,275 | $5,775 | $5,000 |
With these prices, the break-even sits near 23% of kWh on-peak. Below that, TOU energy costs less; above it, more. The demand side has to be run separately, on the schedule’s own demand rules.
The lesson is not the numbers. It is that a few points of on-peak share decide the answer, so the test has to use your own intervals, season by season.
Seasons change the answer
Most TOU schedules price summer and winter differently, and many move the peak window between seasons. A site can fit TOU well for eight months and poorly for four.
Run the test season by season, using the schedule’s own season dates. A warehouse with heavy afternoon cooling may put a large share of its summer kWh on-peak and very little in winter. An office with electric heat may do the reverse. The annual total is what you pay, but the seasonal split tells you where the risk sits and which months to watch.
It also tells you when a switch should take effect. Requesting a move just before the expensive season gives you the least time to adjust operations before the highest prices apply.
What can move, and what cannot
Some loads can shift out of the peak window with a schedule change: EV charging, pre-cooling before the window, batch processes, water heating, forklift battery charging. Others cannot: store lighting during open hours, a kitchen during service, a process that has to run when orders arrive.
List the loads at each site in those two columns before you decide. If most of the on-peak load sits in the second column, a TOU schedule will change the price but not the behavior. Equipment such as thermal or battery storage belongs with a licensed engineer or contractor, and any decision to install should rest on their design.
Portfolios add a twist
A single building either fits a TOU schedule or it does not. A portfolio usually has both kinds of site on the same utility.
That makes the decision site by site, not company-wide. A distribution center running overnight may belong on TOU, while the office upstairs on its own account belongs on a flat schedule. Treat each account as its own question, with its own intervals and its own answer.
It also makes the follow-up harder. Once several sites are on TOU, an operating change at one of them, such as a new shift pattern, can move it from a good fit to a poor one without anyone noticing on the monthly total.
Watch the transition rules
Before you switch, read what the schedule says about:
- Holidays. Which days count as off-peak all day.
- Daylight saving time. Whether the window follows local clock time or standard time.
- Meter requirements. Whether the site needs an interval meter first, and who installs it.
- Minimum stay. How long the account must stay on the schedule before it can switch again.
- Default moves. Some utilities move commercial classes to TOU by default. Check the notices that come with your bills.
Questions to ask the utility
Some answers are not in the tariff, or are hard to find there. Ask the utility’s business account team, in writing:
- Does this account have an interval meter that can bill on TOU now, or does it need a meter change?
- If a meter change is needed, how long does it usually take, and is there a charge?
- From which read date would the new schedule apply?
- Can we see 12 months of interval data in a file before deciding?
- Is any change to TOU periods or prices proposed in a pending filing?
The last question matters. A TOU decision made weeks before the peak window moves is a decision made on the wrong schedule.
Keep checking after the switch
A TOU rate rewards discipline. One week of chargers left on a daytime schedule, or a cooling setpoint changed on a summer afternoon, can undo months of careful timing.
Interval Watch reads interval data for each interval or smart meter and flags on-peak spikes before the bill arrives, with the date and time of each one. Before any switch, the Rate Fit Review reruns 12 months of bills on every schedule a site qualifies for, TOU included, so you see the math first. If you are not sure where to begin, send three bills for a free Three-Bill Read.
