What are time-of-use (TOU) rates?

A time-of-use (TOU) rate is a billing structure where the price of electricity changes based on the time of day. Power costs more when grid demand is high and less when demand is low, typically overnight and on weekends. Unlike a flat rate that charges the same price per kilowatt-hour (kWh) around the clock, TOU pricing reflects what electricity actually costs to generate and deliver at different points in the day.

Two changes in 2025 and 2026 make this topic more financially relevant than it’s been in years:

• Electricity prices have climbed sharply across most U.S. markets.
• The 30% federal solar tax credit for homeowner-owned systems expired on December 31, 2025. 

For homeowners on TOU pricing or evaluating solar, the calculations have shifted.

Why Utilities Charge Different Prices at Different Times

Electricity can’t be stored at scale on the grid. Utilities must generate or purchase exactly as much power as customers are using at any given moment, and that cost changes throughout the day. 

During high-demand windows, typically weekday afternoons and evenings when households run appliances, charge devices, and use air conditioning simultaneously, utilities must buy more expensive power from additional sources to meet the load. During overnight hours, demand drops and the cost of production falls with it.

A time-of-use rate passes those real-time cost differences on to customers. 

The goal for utilities is to reduce grid strain during peak hours by giving customers a financial incentive to shift energy-intensive tasks to cheaper windows. The benefits flow in both directions: utilities reduce the need for expensive peak-hour generation, and customers who shift usage pay less per kWh for the hours they move. 

TOU pricing also helps utilities integrate more renewable energy, since solar and wind generation often peaks outside of evening demand hours.

How a TOU Rate Compares to Flat-Rate and Tiered Billing

Before evaluating whether a time-of-use rate benefits you, it helps to know where it sits relative to other billing structures you might currently be on.

Most residential customers in the U.S. are on either a flat rate or a tiered rate by default. TOU plans were historically opt-in, but many utilities now enroll new customers automatically, making it worth checking which structure applies to your account before assuming anything.

How Peak Hours, Off-Peak Hours, and Mid-Peak Hours Work

Most TOU plans divide the day into two or three pricing tiers:

• Peak hours — the highest-cost window, aligned with late-afternoon and early-evening demand when most households are active
• Off-peak hours — the lowest-cost window, typically overnight and on weekends
• Mid-peak or shoulder hours — a moderate middle tier that some utilities add between the two extremes

The specific windows vary by utility, region, and season. The most commonly cited peak period is 4 PM to 9 PM on weekdays, which applies to several large utilities, but it isn’t a universal standard. The table below reflects each utility’s published rate schedules — verify your specific plan directly with your utility, as windows are updated seasonally.

The dollar gap between those windows matters and varies significantly by market. In markets with modest TOU structures, peak rates typically run 20-30% above off-peak. In high-rate states, that spread can reach two to three times or more, meaning the same dishwasher cycle costs dramatically different amounts depending on when you run it.

Most utilities also adjust their rates by season. Summer typically brings higher peak rates and wider price spreads, driven by cooling demand. In some regions, peak windows shift between summer and winter schedules to follow load patterns. A homeowner managing their usage in July is operating under different conditions than the same household in January.

What’s Different About TOU Rates in 2026

Three developments change the 2026 conversation from prior years.

Electricity rates are higher, and the pressure isn’t letting up. 

Residential electricity prices rose 7.4% for the residential sector in February 2026 compared to the prior year. A meaningful share of that increase traces to AI and data center expansion. U.S. data center electricity demand is projected to nearly double by 2028, driven largely by AI infrastructure, and the capacity costs that flow from that growth are already appearing in retail rates. 

That pressure is structural, not seasonal. 

A larger spread between peak and off-peak pricing means the cost of running your dishwasher at 7 PM or charging your EV after dinner is higher than it was two or three years ago, and likely to stay that way.

The 30% federal solar tax credit expired for most homeowners. 

Following federal budget reconciliation legislation signed in July 2025, the federal solar tax credit for customer-owned systems expired on December 31, 2025. Homeowners purchasing systems with cash or a loan no longer qualify. Solar leases and power purchase agreements (PPAs) still carry federal incentive value through third-party ownership under Section 48E, with eligibility running through the end of 2027.

Battery storage has moved from optional to practical standard. 

As more utilities restructure net metering to pay lower rates for exported solar energy, storing power for use during peak hours is now worth considerably more than selling it back to the grid. Battery storage was once a premium add-on. In markets with significant TOU spreads, it’s become the piece that makes the financial math work.

How Much Can You Save on a Time-of-Use Rate?

Savings depend on how much electricity use you can move away from peak hours and what tools you have to help. For a household with a flexible schedule and shiftable appliances, the annual benefit is real but modest. Adding an EV or battery storage changes the numbers significantly.

Pilot program data from Colorado’s Xcel Energy found that residential customers shifted enough consumption off-peak to achieve net bill savings compared to flat-rate billing, even as base electricity costs increased.

The main factors that determine your actual savings:

• The spread between your utility’s peak and off-peak rates
• How many loads you can reschedule, such as laundry, dishwashers, EV chargers, and pool pumps
• Whether you have battery storage to automate peak-hour avoidance
• Whether your solar system generates enough midday excess to store

Why Solar Panels and Battery Storage Change the TOU Math

Solar panels reduce your grid draw during daylight hours, which helps under any rate structure. 

Under a time-of-use rate, though, the timing creates a specific problem. Most residential systems produce the bulk of their energy between 9 AM and 3 PM, when rates are at their lowest or in the mid-peak tier. Then production falls off right as peak hours begin. The result is that solar owners without storage earn export credits at cheaper rates all day, then buy electricity back from the grid at the most expensive rate every evening. 

That mismatch is the core issue battery storage is designed to fix.

A home battery captures excess solar energy generated at midday and releases it during peak hours. Instead of drawing expensive grid power in the evening, the battery covers the household load from stored solar. On a properly sized system, that shift can eliminate most or all peak-hour grid consumption. 

How to Get Started with a TOU Rate

Whether you’re new to TOU pricing or looking to optimize an existing plan, these steps move the process forward:

• Confirm your current rate plan. Log into your utility account or call customer service. You may already be on TOU.
• Review your hourly usage data. Most utility apps show consumption by the hour. See how much of your usage falls in the peak window before changing anything.
• Shift the easy loads first. Dishwashers, washing machines, dryers, EV chargers, and pool pumps are the easiest targets. Most have delay-start or scheduling features built in.
• Add a smart thermostat. Pre-cooling or pre-heating your home before peak hours reduces how much your HVAC system runs when rates climb.
• Evaluate battery storage. If you have solar panels or plan to add them, a home battery system removes the peak-hour timing problem by automatically discharging stored energy when grid rates are highest.

Most utilities offer a rate comparison tool that estimates your bill under each available plan using your actual usage history. Run it before switching, and revisit it once a year since rate structures and peak windows change.

A time-of-use rate rewards homeowners who control when they draw from the grid. Solar handles the daytime load, and battery storage covers the evening hours when grid power costs the most. To see what that combination looks like for your home and utility, get a free estimate and we’ll walk through the numbers specific to your situation.