Illustration of time-of-use rates for residential utility customers

Time-of-Use Rates: How to Explain the Benefits to Customers

Grid modernization and advanced metering infrastructure (AMI) has been making the U.S. energy supply cleaner and more reliable for years. That long journey is now taking a huge step forward — and directly involving customers like never before — as more utilities prepare to introduce time-of-use (TOU) rate options. Just as AMI replaced “analog” electric meters, the old-fashioned flat-rate bill will soon give way to a more dynamic and variable way for customers to pay for their energy use.

But are customers ready for the change? Those of us in the utility industry have been thinking about AMI and TOU for so long now it’s easy to forget that this idea will be brand new (and probably quite unexpected) for most customers. In fact, TOU billing represents a major paradigm shift for consumers, not just in how they pay their bills but in how they think about their energy use.

To ensure the successful rollout of these rate programs, energy utilities will need to educate customers, explaining how time-of-use rates work and demonstrating how customers can benefit from taking control of their energy use.

Why Should Customers Care About Time-of-Use Rates?

The advantages of TOU billing are obvious for energy providers: By charging higher rates when energy is more expensive, utilities can either recover the cost of peak generation or prompt customers to shift their use to off-peak hours. With fewer peaks to manage, renewable energy sources can be utilized more consistently, making the grid cleaner and more stable.

That all sounds great for utilities. However, a reliable energy supply isn’t really seen as a benefit by customers. It’s an expectation. When a customer flips a switch, they expect the lights to go on; at the end of the month, they pay a bill. They don’t spend a lot of time thinking about all the steps in between or even how much it costs. Electricity just happens.

Indeed, a study by the Smart Energy Consumer Collaborative (SECC) found that nearly half of residential consumers do not know what type of electricity rate plan they currently have. Of those who are aware, nearly all of them said they have a flat-rate plan with static kWh pricing.

What’s more, according to the SECC study, fewer than 40% of customers are aware that any kind of alternative rate plan even exists. Utility marketers have their work cut out for them.

Show Customers How to Take Control of Their Energy Use

If the promise of a more reliable grid doesn’t impress customers, what will get their attention? Marketers should focus on the benefits from customers’ point of view — how they can save money while also supporting a clean and stable energy supply. More than anything, time-of-use rate options allow customers to take control of their energy use for the first time and decide how much they will pay for energy.

In the past, customers could save energy through behavioral changes or home improvements that reduced their overall consumption, but they paid the same for energy no matter when they used it. There was no benefit for, say, running the dishwasher overnight instead of during the day. With TOU, customers can save money by simply shifting the same energy use to a different time of day — or benefit even more when their efficiency efforts reduce energy use during peak hours. Customers can control when and how they save, making a real impact on their bills.

Even better, with smart home technology these savings become automatic — customers can set their thermostats to save during peak hours and never think about it again. SECC’s research found this was a key motivation for customers. Nearly half (44%) of residential respondents indicated that they would be willing to participate in a time-based pricing program if automation technologies were deployed in their home.

Education Will Boost Time-of-Use Rate Adoption

Time-of-use billing will revolutionize the way utilities distribute energy — and the way customers pay for it. By educating customers on how TOU benefits them, and demonstrating how customers can use smart home technology to take control of their energy use and save, energy utility marketers can boost the adoption and acceptance of new rate options.

Educate your customers about time-of-use rate options with a digital engagement strategy from Questline.