A recent report from the Smart Energy Consumer Collaborative found that half of all electricity customers don’t know what electric rate they are on, which begs the question: what electric rate are you on? And what do different electricity rates actually mean?
Determining what electric rate you’re on
The first step to determining what electricity rate you’re on is to find your most recent electricity bill. If you’re on electronic billing, you can access your account online and download a recent copy; alternatively, a mailed paper bill will also suffice.
Using your electricity bill, you can determine what electric rate you’re on in a few different ways. First, your bill will specifically state the name of the rate you are on. While useful, this may not tell you the specifics of how much you pay each hour for electricity; rather, you would have to go to your utility’s website and search for that specific rate tariff.
The second way to tell is to look at the structure of how the costs are calculated. If you’re being charged different amounts for consumption during different time periods, that’s a sure sign you’re on a time-varying rate plan. If you are being charged a single rate for all electricity consumed, then you are on a flat electricity rate plan. (You may see multiple line items all charged at a single rate, but that rate won’t change from hour to hour.)
What different rate types mean
Generally speaking, there are two different types of electricity rates that residential customers may find themselves on: flat or time-varying.
Flat electricity rate plans
Most electricity customers are on a flat electricity rate plan. This means that there is a fixed price you pay for all the electricity you use per month, no matter when during the day, week or month you use it. For example, on a flat rate, you may have an electricity rate of 15 cents per kilowatt-hour (c/kWh), a rate that won’t change from hour to hour or day to day. Regardless of whether you are watching TV in the morning, running your dishwasher overnight, or doing laundry on the weekends, the rate you pay for using that electricity stays constant.
As a result, calculating your electricity bill each month is relatively straightforward: multiply the amount of electricity you used that month by your electric rate. So, if you use 600 kWh in a month on a flat rate of 15 c/kWh, your monthly electricity bill would be $90. In other words, your electric bill is based on the volume of electricity you consume every month, meaning flat rates are often alternatively called “volumetric rates”.
Time-varying electricity rate plans
Alternatively, on a time-varying electricity rate, the rate you pay for electricity varies throughout the day, week, month or season. This means that you may pay one rate for electricity during the morning, one in the afternoon, and another one overnight. Time-varying rates are designed this way to better align electricity usage with the actual cost of producing that electricity. In other words, on hot summer days when everyone is running their air conditioners at the same time, it’s more expensive to produce electricity than during the middle of the night when everyone is asleep and very few appliances are pulling power from the grid, so utilities may be inclined to charge more at those times.
The most common time-varying rates for residential consumers are time-of-use (TOU) rates, which are increasingly popular for customers who install solar and solar-plus-storage. In fact, in California, all new solar customers are required to go onto TOU rates, and all residential customers will be on TOU rates within the coming years.
As with all time-varying rates, on a TOU rate, the price you pay for electricity varies throughout the course of the day. Typically, a utility will create a number of different time blocks over the course of the year and set the rate you pay for electricity during those hours according to how expensive it usually is to generate electricity during certain times.
For instance, Southern California Edison (SCE) has on-peak, mid-peak, off-peak and super off-peak hours occurring during different hours seasonally, as well as on weekdays versus weekends and holidays. In the default SCE TOU rate, the peak period is between 4 pm and 9 pm, however, electricity is priced differently during these hours on summer weekdays as compared to winter weekdays.
There are additional, alternative time-varying rate plans, such as critical peak pricing plans (CPP), where you may pay a slightly reduced rate during most hours, and a very high price during the “super peak” hours, often the 40 or 100 highest stress hours for the electricity grid. Similarly, a peak time rebate electricity rate will actually provide bill credits or a check for lowering your usage during the highest-priced hours of the year.
Save money on your electricity bill with solar
Regardless of which electricity rate you are on, you can save on your monthly electricity bills by investing in solar or solar plus storage. To estimate just how much you could save, check out EnergySage’s online Solar Calculator, which requires no personal information in order to see your results. And if you’re ready to move forward with your solar shopping journey, register for a free account on the EnergySage Marketplace to receive custom solar quotes from local companies.