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What a time-of-use tariff is
A time-of-use (TOU) tariff charges different prices for each kilowatt-hour (kWh) according to when the electricity is consumed. Energy Made Easy, an Australian Energy Regulator service, defines it plainly: “A time-of-use tariff means that electricity is priced differently at different times of the day.” Its page was updated on 20 June 2024.
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Most TOU plans divide the day into three broad periods:
- Peak: the highest price, usually when demand on the network is greatest.
- Shoulder: an intermediate price in some plans.
- Off-peak: the lowest price, often overnight or at other low-demand times.
The labels do not create a universal timetable. Your retailer, local regulator and plan set the exact windows. Weekdays may have different periods from weekends, and summer or winter schedules can change. Some plans use only two rates; others add seasonal, demand, export or event-based charges. A daily supply or standing charge normally remains payable regardless of when you use electricity.
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That is why “use power at night” is not a complete rule. Night-time may be off-peak on one plan and a shoulder period on another, while an evening period that feels late can still be the most expensive window.
How shifting use changes the bill
The core calculation is simple:
TOU cost = (peak kWh × peak rate) + (shoulder kWh × shoulder rate) + (off-peak kWh × off-peak rate) + fixed charges + applicable taxes and network components.
Shifting saves money only when the reduction in peak-cost kWh is greater than the added cost of any electricity that remains in peak periods, plus any difference in fixed or plan-specific charges. Moving an appliance to a cheaper period does not automatically reduce consumption; it may only change its price.
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Usage patterns that tend to help
- You are away during weekday evening peaks and use more electricity overnight or at weekends.
- An EV, battery, water heater or pool pump can be scheduled without affecting safety or comfort.
- Dishwashing, laundry and drying can wait for a delayed-start period.
- Your home has enough flexible demand that a meaningful share of monthly kWh can move.
Patterns that can make TOU more expensive
- Heating, cooling, cooking and laundry must run during peak windows.
- Occupants are home at the same time each evening and cannot change routines.
- A low overnight rate is offset by a high evening rate where most of your usage occurs.
- Seasonal peak windows coincide with your largest heating or cooling load.
The Ontario Energy Board advises customers to examine total monthly use, the share used in each TOU period, seasonal changes, lifestyle, EV charging times and whether large appliances can be moved. It cautions: “There is no guarantee you will save money if you switch between TOU, ULO and Tiered prices.”
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TOU versus flat and tiered pricing
Before switching, compare the plan types using your own interval usage rather than a headline rate.
| Feature | Time-of-use | Flat-rate plan | Tiered plan |
|---|---|---|---|
| Price variation | Rate changes by time period; peak, shoulder and off-peak may apply. | One energy rate at all times, subject to the plan’s other charges. | Price changes after a usage threshold, but not by time of day. Ontario describes its tiered plan this way. |
| Value of shifting usage | High if substantial kWh can move into cheaper windows. | Little or none, because timing does not change the energy rate. | Timing does not change the rate; total monthly consumption relative to the threshold matters. |
| Risk for inflexible households | Peak use can cost more than under another plan. | Less exposure to time-based peaks, though the single rate may be higher. | Crossing a threshold can raise the marginal rate. |
| Seasonal complexity | Peak windows and rates may change by season or day type. | Usually simpler, but contract and network rules still apply. | Thresholds and prices can vary by jurisdiction and season. |
| Meter and enrollment | Usually requires interval-capable metering and may require opt-in. | Often available with conventional metering, depending on the market. | Eligibility and meter rules are local. |
| Best comparison method | Use period-by-period kWh and include every fixed charge. | Compare the total bill using the same consumption history. | Apply your monthly kWh to the published threshold and rates. |
Availability, bill protection and exit rules differ by jurisdiction. A plan that is attractive for one home can be poor for another with a different occupancy pattern.
Which loads are worth shifting?
Electric-vehicle charging
EV charging is often the largest controllable load in a modern home. Set the vehicle or charger to begin in the plan’s cheapest verified window, and limit charging to what is needed before the next trip. A smart EV charger can follow a schedule, but it must be compatible with the vehicle, electrical installation and tariff. If your car is routinely plugged in during an expensive evening period and starts immediately, the tariff advantage can disappear.
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Dishwashers, washing machines and dryers
Delayed-start functions can move these loads to a shoulder or off-peak period. Check that the appliance can operate safely when unattended, keep ventilation clear and follow the manufacturer’s instructions. Noise, vibration and building rules may make overnight operation unsuitable even when the price is lower.
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Pool pumps and batteries
Pool pumps can often run in shorter scheduled blocks rather than continuously during a peak window. Home batteries can charge when electricity is cheaper and discharge during expensive periods, but round-trip losses, export rules and battery degradation affect the economics. Do not assume a battery saves money without modelling those factors.
Electric water heating
Some suppliers offer controlled or dedicated off-peak water-heating arrangements. A timer on a standard heater is not equivalent to such a tariff: confirm the equipment, wiring, control signal and eligibility with the supplier and a qualified electrician.
Other discretionary demand
Computer equipment, cooking preparation, dehumidifiers and similar loads can sometimes be moved, but the saving is proportional to their kWh. A smart plug with scheduling and energy monitoring can show when a device runs and automate a modest load. It cannot change your tariff eligibility, and it must never be used beyond its rated voltage, current or power.
Do you need a smart meter?
TOU billing generally needs interval data so the retailer can assign each kWh to the correct period. Australian Government guidance says access to these tariffs requires a smart meter that measures consumption in half-hour intervals. Ofgem explains that smart meters provide automatic readings, show current use and can enable flexible dual-rate tariffs.
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A smart plug, appliance timer or home-energy display is different. Those devices help schedule or measure a load after you are eligible for the plan; they do not record the whole home for billing and cannot substitute for an approved interval meter. Ask the retailer whether installation, communications, inspection or a meter exchange fee applies.
How to compare a TOU plan before switching
- Write down the complete schedule. Record peak, shoulder and off-peak hours for weekdays, weekends and each season. Check whether public holidays follow weekend rules.
- Collect recent bills. Use several bills covering different weather and occupancy conditions. Note total kWh, period-by-period kWh if shown, daily supply or standing charges, taxes and delivery components.
- Map flexible loads. List EV charging, water heating, laundry, dishwashing, pool equipment, batteries and other loads that can genuinely be delayed. Exclude anything that cannot run safely or reliably without supervision.
- Model both plans. Apply your actual kWh to each published rate, then add fixed charges, taxes, demand components and any export charges. Use the local regulator or supplier calculator where available; Ontario provides a bill calculator, and Queensland directs customers to the Australian Energy Regulator’s free Energy Made Easy comparator.
- Check eligibility and protections. Confirm smart-meter requirements, opt-in or opt-out rules, exit fees, bill-protection periods, contract length and what happens if the meter stops sending interval data.
- Set schedules conservatively. Start with one controllable load, verify that it completes before needed, and avoid placing safety-critical equipment into unattended operation.
- Review actual bills. Compare the first bills with the model. Investigate unexpected peak kWh, changed seasonal windows, estimated reads or new charges before deciding whether to stay.
When an EV makes TOU worthwhile
An EV strengthens the case only when charging energy is a large, movable share of household demand and the tariff’s cheap period overlaps with the time the car is parked. A driver who returns during a peak window can delay charging until overnight; a driver who needs an immediate charge for an early trip may not be able to shift all energy.
Calculate the energy needed between charging sessions, then compare a scheduled start with the default immediate-charge pattern. Include charger losses, any separate EV rate, demand charge, connection fee and the cost of charging at public stations if home charging is delayed. A smart charger provides control and records, but it does not guarantee savings.
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Hawaii’s Public Utilities Commission says TOU rates can align customer prices with production costs: abundant daytime solar can be cheaper, while evening demand is more expensive. Its consumer guidance urges selected customers to shift energy away from the evening peak, using timers for water heaters and appliances and scheduled EV charging.
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A UK Government announcement dated 16 April 2024 argues that shifting demand can reduce backup generation and network investment. It estimates up to £50 billion in system savings by 2050 and £5.6 billion in household bill savings over the smart-meter rollout. Those are policy estimates for the system and participating households, not a promise that an individual bill will fall. The announcement highlights heat pumps, EV chargers and batteries as smart appliances that can run when electricity is cheap and abundant.
Common problems and how to correct them
The first bill is higher
Check whether most usage remained in peak periods, whether a seasonal schedule began, and whether the new plan has a higher daily charge. Compare billed interval data with your original model rather than judging from the advertised off-peak rate alone.
The tariff windows changed
Retailers can publish different schedules for summer, winter, weekends and holidays. Save the current schedule with each bill and update appliance timers when the season changes.
Interval data is missing or estimated
Contact the retailer if a smart meter is offline or a bill shows estimated reads. Until data is restored, the account may be billed under fallback rules that do not reflect your actual timing.
An automated load did not save money
Verify that the device actually started in the intended period, that standby consumption was not added, and that the timer uses local time after daylight-saving changes. A smart plug cannot control a load that exceeds its rating or a circuit that requires a dedicated control system.
Comfort or safety suffered
Cost savings never justify unsafe wiring, overheating, poor ventilation, frozen pipes or inadequate hot water. Restore a safe schedule, follow the appliance manual and use a licensed electrician for fixed wiring or high-power equipment.
A practical decision rule
Choose TOU when your measured, flexible kWh is large enough to offset the plan’s peak exposure and fixed charges, and when you can automate or reliably perform the shifts. Stay with a flat or tiered option when most demand is unavoidable during peak periods, seasonal variation is severe, or the model shows no dependable saving. Recalculate after adding an EV, battery, electric heating or a major change in occupancy.
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