From Board Member Lillian Rafii:
If you are small business based in California, it is more than likely that your utility company uses Time-of-Use or Peak Pricing. Curious about what these terms mean and what the difference is? These two topics can be confusing, especially as Time-of-Use (“TOU”) pricing is used in conjunction with peak pricing. Often, they overlap! All business customers have been (or will soon be) converted to TOU rate plans as required by the California Public Utilities Commission, so it is helpful to think strategically about options now. To demystify some of the mayhem, this post gives a description of each term with descriptions of each program. Links to the following three main California utility companies’ respective programs are provided: Pacific Gas & Electric Company (“PG&E”), Southern California Edison (“SCE”), and San Diego Gas & Electric (“SDG&E”).
We hope you find this helpful in navigating your utility bill and pricing options!
What is Time of Use, or TOU, Pricing?
TOU Pricing is an energy pricing model where the price of energy is based upon the time of day and season. This is different from traditional “flat” rates where all energy usage is billed at the same price. During times of high energy use or need, such as mid-afternoon on a hot summer day, energy will be more expensive. During times of low energy use or need, energy will be cheaper.
Hours in the day are generally divided into different periods corresponding to the load the grid faces.
Using SCE as an example, three TOU time periods exist during the summer months: On-Peak (noon – 6 pm), Mid-Peak (8 am to noon, 6 pm to 11 pm), and Off-Peak (11 pm – 8 am). During these times, a different rate is charged, with On Peak being the most expensive and Off-Peak the cheapest. During the winter months, two time periods exist: Mid-Peak (8 am to 9 pm) and Off-Peak (9 pm to 8 am).
TOU pricing increases the price of electricity when strain on the grid is the heaviest, such as during hot afternoons in the summer. The philosophy and goal behind the plan is to discourage the use of energy during high usage hours and encourage use of electricity during low usage hours of the day. This encourages a shift of energy use when strain on the grid is highest.
On a flat electricity rate, customers could only lower electricity bill when using less electricity and often, the grid would be severely strained by the increased power demand. Ideally, on a TOU rate, a business owner has more control over their bills by choosing how to shift their electricity usage.
Features of TOU Pricing:
- Ideally, it provides customers with more control over their monthly electricity bill.
- Allows customers to take advantage of lower rates on weekends, holiday and evening hours.
- If customers can reduce their electricity usage during high usage hours or shift them to low usage hours, they will be able to take advantage of lower rates.
Links to TOU Pricing:
What is Peak Pricing?
Peak pricing is a rate plan program offered by all three of California’s main utility companies. Under peak pricing programs, customers are given a discount, credit, or some price incentive on electricity costs in exchange for higher prices between 8 to 18 (depending on the utility) selected days of the year, which are usually the hottest days of summer when the grid is most impacted. Customers will generally be alerted the day before via text or email that the next day will be a Peak Day. Different companies have different features. For example, SCE has their peak pricing days (otherwise known as Summer Advantage Incentive, or Critical Peak Pricing) between June through September. SCE’s events last for 4 hours, from 2 pm to 6 pm. PG&E holds their peak pricing days between May 1 through October 31 each year. Some companies, such as SCE, guarantee during the first 12 months that their customers will not have to pay more than they would have if they did not enroll.
Features of peak pricing:
- Electricity use is reduced on the days the power grid is under the most strain, ideally keeping California’s energy supply reliable for everyone.
- If customers are able to monitor, track, and plan their energy use, they can optimize their usage to lower their monthly bill using the peak pricing incentives.
Links to Peak Pricing Pricing:
SCE builds in peak pricing into a seasonal incentive plan called Summer Advantage Incentive, otherwise known as Critical Peak Pricing):
Incentives and Energy Consultations:
All three of the primary California utility companies offer rebates and incentives to save money while saving energy. Check out your utility company for rebates, savings, and partnerships. They can include: using rebate-eligible equipment that save energy, cash incentives for retrofitting, a summer A/C program that cycles the A/C on and off in return for an annual credit, and even loans for energy efficient business improvements. Furthermore, they all offer a free consultation and/or energy audit. Links to each utility’s company site for their energy consultation below:
PG&E. Sign up for a free energy consultation here.
SCE. Check out energy saving recommendations.
SDG&E. Schedule a free on-site energy appointment to optimize energy operations
