What Is Time-of-Use Metering and Should You Sign Up?

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Keeping tabs on how much electricity you use is a good way to save money on your utilities. But money expert Clark Howard says power companies who have to supply homes, businesses, factories and more have found the business to be much more complicated of late.

As a result, your power company may try to sell you on a rate option that helps them and (maybe) you. Here’s Clark’s take:

Who Should Sign Up for This Power Company Deal?

“So power companies are trying to shift some of the capacity burden to you and me, and they’re doing so with teasers that say, ‘Hey, we’re going to offer you this incredible deal on power and you, during certain times of the day, will get power nearly for free in return for other times of the day paying a much, much higher price than you do now,’” Clark says.

This is called “time-of-use metering.”

What Is Time-of-Use Metering?

According to the U.S. Department of Energy, time-of-use rates are those “where prices move at set times and amounts through the day – generally with an afternoon peak period, overnight off-peak hours, and two ‘shoulder’ periods in the hours in between.”

These time-of-use meters also have an additional wrinkle in certain parts of the country where power companies are trying to prevent brownouts or blackouts, according to Clark.

“They are offering you incentives where they take control of, as an example, your air conditioning and make you sweat a little when their capacity goes down when they just don’t have enough capacity left.”

This option, which is a form of time-variable pricing, is one we’ll talk about later. Right now, we’ll explain a bit more about time-of-use metering.

Time-of-Use Metering: Is It Worth It?

If you receive a mailer from your power company about switching to time-of-use metering, you may be tempted to take them up on it immediately, but Clark wants you to think about it.

“The problem for you and me as consumers with busy lives is can you truly manage the power use in your house?” Clark asks. “Because if you go to one of these time-of-use plans and you’re not able to actively manage the use of power in your house, all you’re doing is almost certainly raising what you pay for power at your house.”

How Time-of-Use Metering Can Cost You More Money

Clark says you’ll likely pay more money for your electricity if you don’t strategically pick the time to use the power you have under a time-of-use rate plan.

“So they may say, ‘OK, from 11 o’clock at night to 6 o’clock in the morning, we’re going to charge you a penny a kilowatt for your power and you’re like ‘Man, that’s like free!’ and it is virtually free power, but the rest of those 24 hours, you’re paying potentially a giant rate per kilowatt hour. And when is almost all power being used? The rest of those 24 hours.”


How Time-of-Use Metering Can Save You Money

On the other hand, Clark says if your lifestyle is such that it lends itself to you capitalizing by taking advantage of cheaper energy during offpeak periods, time-of-use metering can pay off.

“So some people are in a position – based on how they work, how they live, whatever – that this works great for you,” Clark says.

“Let’s say you have an electric vehicle, so you set it up when it only charges in those hours when power is virtually free. Then for you, it’s a steal, right? Well, you also have to think about when you’re doing laundry and when you’re doing other things in your home. And if you’re now working at home as a hybrid worker or whatever, and not having to go to the office, your power use during peak demand times may be much higher than it was when you used to go to an office.”

Another Option: Time-Variable Pricing

Another wrinkle that the power company can offer you is one that involves time-variable pricing. Clark says this option involves “getting a discount for allowing the power company to take control of your air conditioning when they’re peaking – peaking is when they’re running out of available kilowatts and you’re facing the potential in your area or state of brownouts or blackouts, which can happen a number of places during a heatwave.”

Clark says when he’s participated in time-variable pricing, he’s been happy to do it along with reaping the benefits of the monetary incentives that power companies often add with it.

“When demand was going crazy, they would turn my air conditioner off for a period of time and then it got hot in the house,” he says, “but I got a reward every time they needed to do that, I got a cash bonus.”

Final Thoughts

Clark says your power company is going to try its best to get you to sign up for a time-of-use metering plan, but you should weigh accepting one carefully before taking it.

“You’re going to get – potentially if you haven’t yet – fancy, colorful brochures in the mail, in the traditional mail, and email notifications offering you these time-of-use rate plans, but just know that it is the rare individual who ends up paying the same or less than before. Most people with time-of-use meters end up paying more. So you’ve got to know yourself and your own life situation before you accept one of these supposed bargains offers that turn out usually to be anything but a bargain.”

As for a time-variable plan that gives you a deal on your rate, he says, he has no problem with it and would do it again if it were offered where he lives now.

Not only did agreeing to a time-variable plan add to his bottom line, but “it helped the power grid stay more reliable,” Clark says. “That’s a case where my self-interest benefited and I was doing something good for the overall community. That I’m fine with, other than I was sweating a little.”

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