Understanding your electricity bill: tiered pricing versus a time-of-use rate schedule?

Sometimes it feels like you need a degree in rocket science to understand your electricity bill. Determining what type of rate schedule you should be using, assuming you have a choice, is important, especially if you are considering a switch to solar energy.

Many utilities charge their residential customers using a tiered pricing schedule,  where users pay a certain amount for base use and then pay another amount for additional consumption. However, time-of-use pricing is becoming increasingly available, and is designed to charge customers more for their electricity during the highest demand time periods. So which one should you use?

Well, that depends on how much electricity you use and when you use it. Do you work from home or does the house sit empty during most week days? Are you gone in the summer to a cottage or are you cranking up the A/C during the hottest hours of the day? In the winter, do you heat your house using electricity or natural gas?

Tiered Rate Schedules

At Southern California Edison (SCE) for example, most homeowners are on a tiered rate schedule, with four different tiers:

Tiered Electricity Pricing
Image credit: sce.com

Tier 1: $0.15 per kWh

Tier 2: $0.19 per kWh

Tier 3: $0.28 per kWh

Tier 4: $0.32 per kWh

According to SCE, about one quarter of their customers never exceed tier 1 for the length of their billing cycle.

Time-of-Use Rate Schedules

SCE offers various TOU rate schedules that offer off-peak savings. These types of schedules may reduce your total energy charges if you use most of your energy during the off-peak hours of 6 p.m. through 10 a.m. weekdays or on weekends. The schedules also vary between summer and winter. In this example, the summer has three time periods with different rates, off-peak, mid-peak, and on-peak, whereas the winter schedule has two rate periods, off-peak and mid-peak.

Time of Use Electricity Pricing Summer
Image credit: sce.com
Time of Use Electricity Pricing Winter
Image credit: sce.com

If you have solar energy, time-of-use pricing could benefit you because you will be producing most of your solar electricity at exactly the time when electricity is at its most expensive.

Your first step if you are considering solar energy for your home should be Sunmetrix Discover so you can see how much solar electricity you can produce where you live.

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