Time-of-Use Electricity Rates and Cost Savings Potential

by Ali Syed, trainer for CIET's Certified Energy Manager (CEM) course

Generally, most utility users pay a flat rate for the electricity they consume. These rates are usually the same for the entire year. However, time-of-use (TOU) electricity metering involves dividing the day, month, and year into ‘tariff slots’ or ‘bands’, with generally higher rates at the peak load periods and low tariff rates at the off-peak load periods. The goal of TOU is to get people to reduce their electricity consumption during peak-load time slots and shift it to off-peak time slots. Intelligent load management or demand response can win immediate economic benefits for the consumer. 

The TOU package is equally beneficial for the power company. Power companies are designed to be capable of meeting peak demands, but generally, they cannot store power. For all off-peak periods, the surplus capacity costs a lot of money for maintenance without generating much income. So, if the peak load can be reduced, the company can save money on building different power plants and offer discounted rates.  

Lights and commonly-used appliances like refrigerators, microwaves, laundry, dishwashing, computers, etc., represent a significant portion of the electricity usage in the Canadian residential energy end-use. Similarly, air-conditioners are a source of electricity consumption in the summer. In addition, many houses use electric DHW heaters and electric baseboard heaters to heat the water and maintain comfortable interior temperatures in the winter.  

In the context of the residential sector, based on a study¹ whereby shifting the "appliance and lighting" loads and the "total electricity load" (including HVAC and DHW) to the off-peak hours for the typical days, it was found that, by intelligent load management, up to 28 % of electricity cost savings are possible in a typical weekday. Similarly, by shifting only the appliance load to off-peak hours, up to 6.3 % in daily electricity costs can be saved.  

Though the TOU rates and climatic conditions vary, in general, adopting energy conservation measures along with efficient demand response measures like occupancy and daylight sensors, low flow faucets and showerheads, improved house insulation, etc. can further increase the potential for cost savings for electricity in domestic sectors.

¹Source: Impact of adopting the time-of-use rate plans on the electricity cost in the Canadian residential sector, AM Syed - Building Simulation, 2009