Time-of-Use Electricity Rates Explained for Homeowners
How time-of-use electricity rates work, who they help, who they may cost more, and what to check with your utility, including how solar fits in.
Published 5 min readRoofPayback editorialChecked by automated fact and quality checks
Official data: EIA · DOE · IRS · how we check
In this article · 9 sections
Short answer
A time-of-use (TOU) rate charges different prices for electricity at different times of day. Power costs more when many people use it and less when demand is low. Your utility sets the hours and the prices, so two homes in the same state can pay very different rates.
TOU can help if you can move some use, such as laundry, dishwasher cycles or EV charging, to the cheaper hours. It can hurt if most of your use falls in the expensive hours and you cannot shift it. The only way to know is to compare your own usage with your utility's rate schedule.
What a time-of-use rate is
Most homes pay a flat rate. Every kilowatt-hour (kWh) costs the same price whether you use it at midday or in the evening. A kWh is the energy a large appliance uses when it runs for a while, measured precisely. If that term is new, see our guide on what a kilowatt hour is.
With a TOU rate, the day is split into periods. Utilities usually call them peak, off-peak, and sometimes "shoulder" or "mid-peak." Each period has its own price per kWh.
The details differ by utility:
- The hours that count as peak.
- How big the gap is between peak and off-peak prices.
- Whether the schedule changes by season.
- Whether weekends and holidays are priced differently.
- Whether there is a fixed monthly charge on top.
We do not list those details here because they change by utility and by plan. Check the rate sheet on your utility's website or ask them directly.
Why utilities use TOU pricing
Electricity must be produced as it is used. When many homes run air conditioning or cook dinner at the same time, the grid is under the most strain. TOU rates are meant to give customers a reason to use less at those times and more when the grid is relaxed.
That is a general explanation of the idea, not a promise about your bill. Whether a TOU plan lowers your bill depends on your habits and on the plan you are offered.
Who TOU rates tend to help
TOU plans usually work best for households that can move use around. Examples include:
- People who charge an electric vehicle overnight. Our guide on home EV charging cost by state shows how charging costs compare.
- Households that can run laundry and dishwashers late in the evening or early in the morning.
- Homes with a battery or smart thermostat that can shift use automatically.
- People who are away from home during the usual evening peak.
Who may not benefit
TOU rates may cost more if you are home most evenings and use a lot of power then. Families with young children, remote workers who cool the house all afternoon, and anyone who cannot change when they cook or run the air conditioner may see higher bills.
Many utilities offer both a flat plan and a TOU plan. If yours does, you can often compare them using a year of past bills before you switch. Ask the utility how to switch back if the new plan does not work for you.
Prices differ a lot by state
TOU rates sit on top of a base price that already varies widely across the country. These are average residential prices from the U.S. Energy Information Administration (EIA) for July 2026.
| State | Average residential price (July 2026) | A year earlier |
|---|---|---|
| Hawaii | 48¢ per kWh | 39.36¢ |
| California | 33.61¢ per kWh | 32.66¢ |
| New York | 29.9¢ per kWh | 26.22¢ |
| Texas | 15.88¢ per kWh | 15.36¢ |
| Nevada | 12.77¢ per kWh | 12.39¢ |
| Louisiana | 12.72¢ per kWh | 13.12¢ |
These are statewide averages across all hours. They are not TOU peak or off-peak prices. A TOU plan in any of these states would charge more than the average at some hours and less at others.
For every state, see our electricity prices by state page. For why the numbers differ, read why electricity prices differ by state.
How TOU interacts with rooftop solar
Solar panels make power during the day. A TOU plan can change how much that power is worth to you, because the value depends on the rate in the hours when you use or export it.
Two things matter most:
- When you use power. If your solar output covers daytime use, you avoid buying power in those hours. If your highest prices fall in the evening, after the sun goes down, solar covers less of the expensive period.
- How your utility credits exported power. Net metering and solar incentive programs vary by state and utility. DSIRE, a database of programs, is at programs.dsireusa.org. Our guide on net metering vs. net billing payback explains why the credit rules can change your payback.
Our calculator uses a simple example home: a 7 kW system, 10,500 kWh a year of use, 40% of use while the sun is up, and an installed cost of $3,000 per kW, or $21,000 total. It assumes no incentives, $100 a year in maintenance, electricity prices rising 2.5% a year, and panel output falling 0.5% a year over 25 years. It does not model TOU schedules, so a TOU plan from your utility could make your real result better or worse. You can run your own numbers in the solar calculator.
Note that the 30% federal Residential Clean Energy Credit (Section 25D) is not available for property placed in service after December 31, 2025, according to the IRS. Read more in is solar worth it without the tax credit.
Questions to ask your utility
Before you switch to a TOU plan, ask:
- What hours are peak, and do they change by season?
- What is the price per kWh in each period?
- Are there monthly fixed charges or demand charges?
- Can I try the plan and switch back?
- If I have or plan to get solar, how are exported kWh credited under this plan?
Write down the answers and compare them with your last twelve months of bills. Our electricity cost calculator can help you see what you use.
Bottom line
A time-of-use rate rewards you for using power when it is cheap and charges more when it is not. It helps flexible households and can backfire for homes that use most of their power at peak hours. Prices also vary a great deal by state, so your utility's rate sheet matters more than any average.
If you are thinking about solar, check how your utility prices and credits power under TOU before you rely on any payback estimate. Use the solar calculator for a starting point, then compare it with a real quote.
Sources
Get new articles by email
New articles and the monthly electricity price update. Unsubscribe anytime.
See our privacy policy.