Saturday, May 4, 2013

How Utility Rates and Time of Use "TOU" Rates Work With Solar

Understanding Time of Use Rates
Gary Fairhead 2010

PG&E customers are billed according to “how much” electricity they consume. This volume of energy is measured in kilowatt hours i.e. kWh. “Tiers” have been created to “Price” the energy you use each month. These “Tiers” of energy increase in price as consumers consumption of energy increases. The first tier is what PG&E believes the average consumer “should” use to power their home. If consumers decide to use more than this “baseline” of energy, PG&E then starts increasing their pricing as consumption increases.

The following is a brief graph of how PG&E bills most customers. This is based on an E-1 electric rate in territory R B. Total electricity used it this example is 2255 KWH and the total cost is $723.05.

Tier 1 543 KWH $.11887 $62.61

Tier 2 162 KWH $.13502 $21.35

Tier 3 380 KWH $.28562 $98.70

Tier 4 569 KWH $.42482 $241.72

Tier 5 600 KWH $.49778 $298.67 (unlimited)2010 Pricing

As the above chart shows, the more energy you consume, the more PG&E charges you per KWH. Notice that the first two inexpensive tiers account for only $84 of your entire electric bill. From that point on you jump immediately from $.13 to $.28 per kwh and then on to $.42 and $.50 per kwh! After the first $84 per month, you will be paying a very high price for your electricity.

To help consumers go solar, there are financial incentives available for them including State rebates and Federal Tax Credits.

However, the one financial tool that is seldom given the credit it deserves is the “Time Of Use” rate i.e.TOU. Electrical current produced by a solar system is first used to satisfy the home’s electric needs. Should extra energy be produced, it is sent out to the grid to “help out” the community’s energy needs. California uses “Time of Use” rate structures for solar customers, which means that this excess electricity sent out to the grid during the day puts credits in the customer’s account at a higher dollar value than the electricity he buys back at night.

Summer TOU rate schedules

Summer Peak Pricing 1PM-7PM $.30 per kWh
Summer Part Peak Pricing 7PM-9PM 9AM-1PM $.14 per kWh
Summer Off Peak Pricing 9PM-9AM $.10 per kWh

During Peak hours, you account can receive a credit of $.30 per kWh for every kWh you send out on the grid! In addition to this, you will only be charged $.14 per kWh during Part Peak times and just $.10 per kWh in Off Peak times.

Because this “exchange” rate is so financially attractive, solar customers can utilize several tips to maximize their energy savings while increasing their kWh of consumption!

One tip is to over cool your home in summer months several degrees lower than you would like up to 1 PM. This is because you are now doing the major cooling of your home at the 11-14 cents per kilowatt hour rate. As soon as 1 PM arrives, you can have your thermostat automatically set back to the temperature you would normally set it at. Turn on some ceiling fans and now coast until the temperature forces the AC system to start cooling down your home. This “coasting” time should create 4-5 hours of high solar credits to your account to now use back at very inexpensive rates.

Pools and spa equipment, exterior lighting, laundry, and air conditioning utilized during Part Peak and Off Peak times are now billed at these very low rates.

Time of Use Rates can easily become a 2nd rebate that is usable for the entire life of the solar system. Without this exchange rate, customers would need to build a 20-30% larger solar system!

Conservation should also be utilized to increase your life style while lowering your energy demands. You will see many articles on energy conservation in our blog with more coming soon!


  1. TOU still has a baseline/tiered pricing structure which varies with season.
    Can you explain how PG&E credit your account relative to this?
    How do they apportion your daily baseline for the different TOU periods?
    Do they credit you with the higher tiered values if you spin the meter backwards more more than the baseline?
    Since both rates and baseline are different per season, how do they reconcile it - per day/month/season/year?
    Thanks in advance for any insight you can provide!

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