Reasons Why Time-Of-Use Pricing Method Will Increase Your Electricity Dues

By : Next Level Energy | September 20, 2019

Decades ago, electricity bills were easier to interpret. This was done by obtaining the magnitude of current used, multiplied by the prevailing cost per kilowatt-hour (kWh), in addition to other non-specific charges stress-free.

Recently, power companies like PG&E have made moves on changing the method of payment for electricity.  The costs of electricity production are higher when demand is high compared to times when demand is low. Take for instance, when most people leave their houses for work, there is low usage and electricity is cheaper than when they come back from work and switch on electrical gadgets. At these times, there is pressure on PG&E to produce more electricity thereby leading to increased energy costs.

This pattern has been seen repeatedly in California. Last year, the U.S. Energy Information Administration wrote an article stating how California’s energy costs have been on the rise yearly during times of increased demand per day.

An Hourly Breakdown of California’s Energy Price

The cost of electricity from 8 PM in 2016 per megawatt-hour was $35which increased to $60 in the subsequent year partly due to the high reliance of its energy companies on redeemable sources of energy like solar power. Of course, there was an obvious decrease in its production cost during times of low demand.

The major concern now is the mode of transformation of the energy market since putting more energy to use as at the time needed is costlier, thereby resulting in rapid increase in prices at both the early and late hours of the day; except for institutions who remit a constant price for electricity since there’s no way electricity providers can recover the costs incurred in rendering electrical services in times of very high demand excluding the general cost of electricity.

Hence, the reason core California power companies are currently introducing a new pricing method for electricity named “Time-of-Use”.

Energy Prices – Time-of-Use Pricing

Time-of-Use Pricing simply means you are charged according to when you utilize power either at home or for business.

Time-Of-Use (TOU) pricing segments hours of the day, with each time frame differing according to dead periods. As of April 2018, PG&E mapped out its plan (applying E-TOU-A) thus:

This may look easy but for the fact that there is a slight change of plan from June to September, with a reduced rate of $0.32 and a high rate of $0.40, while between October and May, the reduced rate is $0.27 when the inflated rate is $0.28. So, seasonal variations also determine prices PG&E customers pay.

The majority of energy users are often faced with the sudden inflated bills of the time-of-use pricing method.

High costs of TOU pricing compared to the traditional or basic method is the main concern. Looking at the basic plan, for instance, the normal prevailing price is $0.21 per kWh, which is lesser than the lowest pricing TOU rate by 6 cents and summertime high rates by 11 cents.

Energy users should be ready for a costlier and flexible pricing system as the time-of-use method is now the standard being set (by PG&E as from 2020).

PG&E is now using TOU instead of the traditional rate. Just like every other working class individual, the house owner is absent from home during early bright hours of the day and comes home every evening except for weekends. This means 70% or 700kWh of energy consumed in May during zenith costs periods (3am-8pm on workdays) and 30% or 300kWh during idle days.

Considering this, their bill would amount to $377 this May which reflects an increase of 78% more than the amount usually paid using the previous pricing system. This should show you a glimpse of what residents in California will experience when TOU is standardized.

The news is that these high costs are just going to increase. House owners have overlooked the fact that the difference between the zenith and off-zenith costs has been on the increase in the last ten years. As PG&E is implementing the TOU pricing in recent years, analyses of PG&E pricing rates have shown that there is an increasing gap between zenith and off-zenith costs. Between June and July 2013 during summer, commercial zenith and off-zenith costs recorded a difference of 3 cents; during the same time in 2014, it became 3.5 cents. Recently, the difference is over 5 cents.

The pattern is very obvious. With the passage of time, the probability of an increase in the difference between zenith and off-zenith costs is high. Energy will become more unaffordable as at the times itis most needed.

California residents and the entire United States will now have to adjust their ways of life to a larger extent so as to put up with this experience. The way you use your electrical equipment at home will be greatly reduced so as to conserve energy. Otherwise, you would have no choice than to pay up the charges.

Increasing Energy Prices – Is There Another Way Out?

A rising proportion of California house owners have started installing solar power systems on their rooftops so as to relinquish dependence on local power utilities. Following the uncontrollable increase in energy prices, the period at which the calculated cost of obtaining a system will be at par with current electrical charges is rapidly approaching.

It is currently calculated that a typical house owner can save enough money (meant for electrical bills) to buy a solar power system between 5 to 7 years, determined by usage and normal charges. Energy prices are on the high side and increasing daily. Therefore, the above stipulated time frame is expected to decrease. This is why we advise house owners to consider installing solar power. This way, you are exempted from financial pains.

Lastly, we suggest storage batteries for a more dynamic and efficient system for both new and old methods which in turn increases your savings.

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