What is a Time-of-Use Electricity Plan?

Time-of-use (TOU) electricity plans offer a pricing structure where the cost of electricity per kWh changes based on the time of day, day of the week, and in some cases, the season.

The most common time-of-use plans are free nights and free weekends plans. These rate structures, in practice, are designed to incentivize consumers to shift their energy usage to times of lower demand, thereby improving overall grid efficiency and reducing strain on energy infrastructure.

While these plans offer an opportunity for cost savings through strategic energy use, they often can lead to higher monthly electricity bills if usage is not carefully managed.

Examples of time-of-use electricity plans

Two of the most common time-of-use electricity plans are free nights plans and free weekends plans.

Free nights electricity

Free nights electricity plans are considered a type of time-of-use plan because the energy charge changes based on the time of day.

With a free nights plan, your energy charge is free at night. The plan’s Electricity Facts Label will specify the exact hours when the energy charge drops to zero.

During the day, your energy charge is no longer 0 cents per kWh. In fact, it’s often up to two times higher than a simple fixed-rate plan without time-of-use terms.

Many homeowners and renters can get caught up in the idea of free electricity at night. When you realize that a large majority of power consumption occurs during the day in Texas (thanks to long hot summers and high energy use by air conditioners), you understand that the math is not likely to work in your favor.

For most Texans, we do not recommend signing up for a free nights electricity plan. However, there are a couple of scenarios where the plan may work to your benefit:

Texans who have solar panels on their property and can generate power for free most days of the year
Texans who live alone, without pets, and don’t have to worry about keeping the AC on while they are at work all day—even in this scenario, you risk coming home to a very, very hot indoor temperature

Free weekends electricity

Free weekends electricity plans are also considered time-of-use plans because the energy charge changes based on the day of the week.

With a free weekends plan, your energy charge is free over the weekend. A plan’s Electricity Facts Label will specify the exact hours between Friday and Monday when the energy charge drops to 0 cents per kWh.

But during the week? The energy is often much higher than that of a simple fixed-rate plan with a consistent energy charge, no matter the day or the hour.

Similar to the free nights plan, many folks are attracted to the concept of “free” electricity. But again, the increased energy charge during the week when you consume most of your power outweighs the free and can lead to bills that are higher than you’d expect.

Time-of-use electricity plans vs. other electricity plans

Time-of-use vs. bill credit plans

Bill credit plans offer a credit back on your bill when you consume a specific amount of kilowatt hours. For example, if you use between 1000 and 1999 kWh, you may receive a $50 credit back on your bill.

When a bill credit is earned, the average price of a plan decreases. Many electricity providers take advantage of this on comparison websites to convince more customers to enroll. That’s why it’s important to look closely at plan terms to check the actual energy charge, rather than the average price.

Bill credit plans may be beneficial for those who can pinpoint their total energy usage during a billing period, while time-of-use plans offer more control to those who can shift their usage to a specific time of day or day of the week.

Generally, both bill credit plans and time-of-use plans can be difficult to manage well and often lead to higher-than-expected bills for Texans.

Time-of-use vs. simple fixed-rate plans

Simple fixed-rate plans provide stability with a consistent rate per kWh for the entire contract term. They also don’t come with any confusing time-of-use terms or gimmicky bill credit offers.

With a fixed-rate plan, bills are easier to predict because the energy charge is the same no matter the time of day. At BKV Energy, we recommend that you enroll in a simple fixed-rate plan.

Time-of-use vs. pre-paid electricity plans

Pre-paid electricity plans offer enrollment flexibility, such as no credit checks, deposits, or social security number requirements, but present some drawbacks.

These plans often have higher per-kilowatt-hour rates, leading to increased monthly expenses. Providers will charge a higher rate on a pre-paid plan because they assumemore risk by taking on a customer who does not have to pass a credit check, pay a deposit, or verify their identity with a social security number.

Another critical risk is the potential for service disconnection if prepaid funds are exhausted, which can be particularly hazardous during extreme weather conditions.

On a time-of-use plan, you wouldn’t be at risk of disconnection (as long as your bills are paid in full and on time) during extreme weather conditions, but your bill would most likely skyrocket with higher kWh rates during peak usage time.

Time-of-use vs. EV car charging plans

Electric vehicle (EV) charging plans are designed to provide EV owners with reduced rates during specific periods, typically overnight, to accommodate their charging needs. These plans have the same structure as time-of-use plans, offering lower rates during off-peak hours and higher rates during peak times. However, the elevated daytime rates—often 5-10 cents more per kWh—can offset the overnight savings, potentially leading to increased overall energy expenses.

Given that a significant portion of residential electricity consumption occurs during the day, these higher rates can substantially impact monthly bills. Therefore, it is advisable to thoroughly examine the Electricity Facts Label of any EV charging plan and consider alternatives, such as simple fixed-rate plans, which may offer more predictable and potentially lower costs.

Can you save money with a time-of-use plan?

A time-of-use plan can lead to significant savings if customers adjust their energy use to take advantage of lower rates during off-peak hours. By planning energy-intensive activities such as laundry, dishwashing, and charging electric vehicles during these lower-cost periods, customers can reduce their overall electricity expenses.

When you factor in the cost of air conditioning during the summer, even shifting other energy-consuming activities like those mentioned above will not be enough to make the plan work in your favor.

Tips to save money with a time-of-use plan

Lowering your electricity bill isn’t just about choosing the right plan—it’s also about adopting smart energy habits.

By making simple adjustments like using energy-efficient appliances, optimizing thermostat settings, and shifting electricity use to off-peak hours, you can maximize your savings.

Small changes add up over time, helping you reduce overall energy consumption while making the most of a Time-of-use plan.

Use a smart thermostat: Adjusts temperature settings automatically to optimize energy use.
Install an energy monitor: Tracks real-time electricity consumption to identify cost-saving opportunities.
Choose Energy Star-rated appliances: More efficient appliances use less electricity overall.
Switch to LED lightbulbs: These consume less power and last longer than traditional bulbs.
Use appliances in off-peak hours: Run washing machines, dishwashers, and dryers when rates are lower (refer to your plan for specific timing).
Charge your electric vehicle overnight: Many time-of-use plans offer lower rates at night, reducing charging costs.
Utilize power strips for electronics: Reduces standby power consumption when devices are not in use.

Is a time-of-use plan right for me?

A time-of-use electricity plan is ideal for customers who:

Have flexible energy usage patterns and can shift major consumption to off-peak hours
Use smart home technology to optimize electricity usage
Are not exposed to extreme weather patterns
Want to actively manage their energy consumption to reduce costs

If you prefer a more predictable monthly bill or your energy consumption remains steady throughout the day, a fixed-rate plan may be a better fit.

At BKV Energy, we believe you deserve a transparent, fixed-rate, gimmick-free electricity plan tailored to your household’s unique energy needs.

Check out our popular Bluebonnet energy plan today, or enter your zip code to compare rates and find the best option for your family.

Written by Graham Lumley

Graham Lumley is the Growth Product Manager at BKV Energy, a retail electricity provider in Texas' deregulated market, where he has worked since 2023. He analyzes customer usage and billing data, helps develop BKV's fixed-rate plans, and creates tools to simplify Texas electricity shopping. He has written over 200 articles on Texas electricity rates, delivery charges, plan types, energy generation, and more to help Texans understand their bills and pay less. With over 10 years of experience in consumer products, marketing, and energy, he explains the Texas electricity market in plain language.