Time of Use Energy Billing Between Utilities, Part I

There’s been a lot of discussion in the utility industry over the past several years around “time of use” rates. Electrical utilities use time of use (or “time of day”) billing rates to incentivize customers to spread their energy use throughout the day rather than primarily at peak energy use time periods. Small shifts in usage patterns can often realize thousands of dollars a month in energy cost savings. In today’s marketplace, it’s more important than ever for electricity producers to explore incentives to avoid undue strain, and for electricity consumers to explore their consumption patterns.

Power providers may offer huge rate discounts to its customers during “off-peak” time periods, or time periods when customers are using far less power. For example, a power provider may charge customers $0.06/kWh during on-peak time periods and $0.01/kWh during off-peak time periods. Sometimes, power providers may actually charge a negative rate during off-peak time periods, meaning that they will pay their customers to use energy during those times. Most of this discussion has been around commercial and residential customers, but there is also great potential for incentives between utilities. Water utilities who currently have time-of-use billing structures or have the option to switch to time-of-use billing structures should consider if they can take advantage of their variable rate billing structure.

The Opportunity – An Example
The City of Austin’s time-of-use billing structure is shown in Figure 1 below. Consider a pump station that consumes about 300,000 kWh per month. Each week, 30 hours (18%) are on-peak, 82 hours (49%) are mid-peak, and 56 hours (33%) are off-peak. Since on-peak water pumping usually coincides with on-peak energy use, let’s estimate that the station uses 36% of its energy during on-peak time periods, 49% during mid-peak time periods, and 15% during off-peak time periods. The water utility’s energy (kWh) portion of its monthly bill would be about $11,707. If the utility strategically shifted its pumping times even a small amount, so that it pumped 25% of the time during on-peak time periods, 40% of the time during mid-peak time periods, and 35% of the time during off-peak time periods, the energy portion of the bill would be about $8,597 – a 27% reduction in energy cost. If the utility was a little more aggressive about strategically pumping and pumped 15% of the time during on-peak time periods, 35% of the time during mid-peak time periods, and 50% of the time during off-peak time periods, the energy portion of the bill would be about $6,142 – a 48% reduction in energy cost. The table in Figure 2 summarizes this data. Even modest adjustments to pumping schedules can mean big cost savings.


Whenever an electric utility offers time of use rates, electricity consumers would be wise to seek efficiencies and cost savings. Large consumers of electricity should consider proactively brokering this discussion with their electricity supplier. In my next post, I will discuss some strategies for water utilities to take advantage of time if use pricing.

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