3 Things You Should Know About Electric Rates
In the past, there’s typically been just one way to pay for the electricity you use at home – a fixed price per kilowatt-hour (kWh) of electricity no matter when you use it or how much you use for the month.
With these traditional fixed rate plans, the majority of your monthly bill is total electricity used (in kWh) multiplied by a consistent price, such as 15 cents (roughly the national average). In addition to this, there are usually some fees and surcharges related to the power grid that ultimately give you your total bill amount.
However, as the energy industry continues to evolve, many consumers now have a range of options in how they’re charged for electricity. In general, these new rate plans seek to better align consumption of electricity with clean energy generation and increase the reliability of the power grid.
Let’s look at three things you should know about electric rates today:
1. Time-varying rate plans charge different prices throughout the day.
One of the most significant changes that has come to electric rates in the past decade – thanks to the implementation of smart meters – is that the price you pay per kWh of electricity can vary throughout the day. There are several different types of these time-varying rates. For example, ComEd’s Hourly Pricing enables you pay for electricity at the hourly market price, which is often very low at night and in the morning and more expensive in the afternoon.
However, the most common today is the time-of-use (TOU) rate where prices differ over two or three sections of the day. SMUD’s Time-of-Day Rate is divided into three blocks for June to September (cooler weather rates only have two blocks). From midnight to noon is the Off-Peak period where electricity costs about 14 cents per kWh. During the 5-8 p.m. window, the price jumps all the way up to 33 cents per kWh, and the remainder of the day is the Mid-Peak period at about 19 cents per kWh.
Whether it’s an hourly rate, TOU, critical peak pricing or another time-varying rate, the goal remains the same – to better align the costs that consumers pay with the actual cost of producing electricity. For most power companies for most of the year, this means avoiding the afternoon/early evening peak period. If you can move some of your electricity usage out of this period, you might be able to save quite a bit of money each month with this type of plan.
2. New electric vehicle rates can help you charge up at very low prices.
Do you currently drive an electric vehicle (EV)? Or are you one of the many Americans who are considering one for your next vehicle purchase? If you fit into either of these categories, you should know that many power companies are introducing special electric rates that help you charge your vehicle at home at a very low price. These rates will generally encourage you to charge overnight, since, as mentioned, that’s when it’s usually cheapest for the power company to produce electricity.
For example, Georgia Power’s Plug-in Electric Vehicle rate includes a Super Off-Peak period from 11 p.m. – 7 a.m. that allows EV drivers to charge up for only 1.6 cents per kWh! This is compared to 7 cents during Off-Peak hours and 21 cents during On-Peak hours (from 2-7 p.m. during the summer when it's expensive to produce electricity). According to Georgia Power’s estimate, this allows the average EV driver to charge their vehicle for less than $20 per month.
3. Subscription rates can give you predictability throughout the year.
If you’re like many people today, you would like some stability and predictability in your monthly power bills, and power companies are increasingly looking at options to deliver this to their customers. One way is with subscription rate, which gives you a set price, say $140, each month for your bill no matter how much energy you use.
With these types of plans, your monthly price is typically based on your past usage, and if you use a lot of electricity each month, your price may go up next year – or you may be required to “settle up” the difference at the end of a set period. Power companies are just beginning to test these subscription rates, but many industry experts expect to see more of these in the coming years.
For example, Duke Energy’s Budget Billing plan gives customers predictable bills regardless of changes in their electricity usage or the weather. They offer an annual plan and a quarterly version depending on whether you have 12 months of billing history on your account and how you want to deal with potential settle-ups. If you favor predictability in your monthly budget, you may want to see if your power company has a subscription-style rate plan.
The good news is that you likely now have several options for how you pay for the electricity you use at home, and depending on your specific needs, one of these could work better for you. Some power companies will offer a personalized rate analysis or an online rate calculator that can help you see what your bills would look like with a new plan. Regardless, it’s a great time to look at your options and see if it’s time to make a change.