New Electric Rates Put Power Back in Californians' Hands

California’s policy makers and IOUs are now taking action to reward Californians for using electricity at the times when it is cleanest and most plentiful, by introducing time-varying pricing plans. 

Credit: Jessica Russo (NRDC)

The amount of carbon emitted from generating electricity for Californians depends on the time of day and season that we use electricity. For example, if you do laundry at noon on a sunny day, you can count on your clothes washer running on mostly clean solar electricity. Not so if you wash your clothes after sundown, when fossil gas is more likely to be used to make that electricity.


Similarly, the cost of generating electricity depends on the time of day. Electricity prices are lower when pollution-free electricity is abundant relative to demand (e.g., during weekday afternoons) and when demand for electricity is low (e.g., late at night). Prices are higher in the evenings as the sun begins to set and customer demand for electricity starts to increase.

But until this year, most customers of California’s large investor-owned utilities (IOUs)--PG&E, SCE, and SDG&E--paid one price for electricity whether they used it during low-cost, low-emissions periods or high-cost, high-emissions times of day.

California’s policy makers and IOUs are now taking action to reward Californians for using electricity at the times when it is cleanest and most plentiful, by introducing time-varying pricing plans. These plans—known as default Time of Use (TOU) rates—charge customers less when electricity is abundant and comes from the cheapest and emissions-free resources like wind and solar, and more when electricity is short in supply and dirtier, adding to the state’s climate pollution from powerplants. They are called “default” because customers will need to actively opt out of them.

Encouraging customers to shift their electricity use to times when power is clean and abundant will help get the most out of our renewable energy resources and avoid building costly new transmission infrastructure and energy storage. Encouraging customers to use less electricity through relatively higher charges when the grid supply is constrained will keep electricity costs in check for all, reduce carbon emissions, and lead to a more resilient energy system.

Time-varying electric rates are a new concept for most Californians. To ease the transition, rates will vary in a straightforward manner. For PG&E and SCE customers, rates will vary by four time periods through the year: two seasons (summer and winter) and two times of day (on-peak: between 4 p.m. and 9 p.m., and off-peak: all other times). Rates will be highest during the summer on-peak period, i.e., between 4 p.m. and 9 p.m. from June through September, and cheapest during the winter off-peak period, which is before 4 p.m. and after 9 p.m. every day from October through May.

What Californians can do to keep their electric bills and carbon footprint low

Utilities have begun transferring customers community by community, with the final customers switching over to the new rates next spring. If you are an SCE, PG&E or SDG&E customer, your utility will be communicating with you frequently in anticipation of the new rate, but you can check this website to find out when you can expect to start on the TOU plan. Here is what you can do to further minimize costs when the new rates go into effect:

  • “Turn-off and delay:” As always, you save money and electricity by turning off any lights and appliances when you’re not using them. In addition, you should avoid using high-energy appliances like clothes washers and dishwashers between 4 p.m. and 9 p.m., when electric rates are highest. For example, load your dishwasher like you normally would after dinner, but wait to run it until right before you go to bed or the next morning.
  • Take advantage of utility programs for discounted “set and forget” technologies—like programmable smart thermostats—so you can adjust your energy use during peak times without having to think about it every day.
  • Are you considering getting rid of your old gas appliance to improve service quality and avoid harmful emissions from burning gas inside your home? A heat pump water heater is highly efficient and will  help you take advantage of the lowest electricity rates by heating the water during the off-peak period while supplying you with hot water as you need it throughout the day.

Protecting vulnerable Californians

Not every customer may be able to take advantage of time-varying lower rates. For example, some customers may not be able to adjust their lifestyle to consume electricity differently, while others may not have the ability to install smart thermostats that regulate their homes’ air-conditioning in accordance with these time-varying rates (cooling them before the higher rates go into effect). To make sure all customers are being protected, the private utilities are taking the following actions:

  • Lower-income residents of hotter parts of California, where air conditioning is a necessity at most times of the day, won’t be switched to time-varying rates automatically. This will give lower-income customers more time to access low-cost programmable technologies and figure out how to best manage their energy use before choosing to switch to a new rate.
  • Customers that get time-varying rates will be protected against bill surges for one year. Those whose electric bills are higher than they would’ve been without time-varying rates will receive bill credits from the utilities to make up for this difference.
  • All Californians need to have a good understanding of how these rates work and access to the technology that will help them do their part to use more electricity from renewable resources while paying less in monthly bills. This can be accomplished through more customer education and programs that support the purchase of smart appliances like programable thermostats and water heaters.  

Want to go further?

The new default TOU rates aren’t the only options available to Californians looking to maximize cost savings while taking action against the climate crisis. In addition to offering rate plans that allow electric vehicle owners to access even more affordable energy for charging their vehicles in the middle of the night (with higher rates at peak periods), IOUs have also started launching rate plans for all-electric homes.

SCE was the first California IOU to adopt a rate of this kind—TOU-D-PRIME—which features a small monthly fixed charge that helps lower electric rates throughout the day so you can power all of your home needs with California’s increasingly clean electricity. Following this lead, PG&E and other stakeholders proposed a set of home electrification rate options to help a variety of Northern California customers—from families living in multifamily apartments in San Francisco to those living in larger single-family homes in the central valley—transition from gas appliances to healthy electric options without seeing bill increases. If this proposal is approved, the PG&E rates for all-electric homes may be available as early as spring of 2022.

Transitioning California’s economy to run on increasingly clean electricity is key to meeting the state’s climate goals. We must do so in a way that keeps energy affordable for all. These new electric rates are important steps in that direction.

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