August 9, 2024
You have more control over your electricity bill than you might think. The cost to generate electricity fluctuates throughout the day, and so does the cost to use that energy. Instead of a flat rate in which you pay only for how much energy you use, some utilities allow you to pay different amounts for not only how much energy you use but when you use it. People who can shift some of their energy usage from “on-peak” hours – hours of the day when electricity generation costs are high – to “off-peak” hours – the hours of the day when electricity generation costs are low – are able to save money on their utility bills.
Called time of use (TOU) rates, this model allows residential customers who’ve opted in to control their monthly electricity bill by changing the timing of their energy use to hours when energy is cheaper. They also help utilities increase the use of renewable energy and reduce greenhouse gas emissions by incentivizing customer energy use during times when more renewable energy is available on the grid. This allows customers to save money and reduce emissions – a win win for both the economy and environment.
A closer look at time of use rates
Energy costs different amounts to produce throughout the year, day, and even hour by hour. TOU rates charge customers closer to what their energy costs the company to produce and deliver throughout the day than a flat rate does.
For example, someone on a TOU rate would be charged less than someone on the default flat rate for the same amount of energy used during the morning hours, when renewable sources like solar are available, demand is lower, and electricity generation is cheap. Likewise, someone on a TOU rate would be charged more than someone on a flat rate for energy used in the early evening, when more fossil fuel plants are turned on to meet increased customer demand and the cost of electricity generation rises.
Cost-conscious consumers can benefit from this system by intentionally shifting energy use away from peak hours, yielding lower energy bills with the added bonus that the energy used in those hours results in fewer emissions. Widespread TOU rate adoption is a key tool in increasing the use of renewable energy and meeting ambitious climate, energy, and environmental goals.
A bad deal for Northern Nevadans
NV Energy, Nevada’s largest energy provider, has two service territories: the northern territory, serving Reno, Carson City, and other areas near Washoe County, and the southern territory, serving the Las Vegas valley and surrounding areas. Currently, the peak period, when energy costs are highest, in Northern Nevada is six hours long and lasts from 3-9 p.m. – an on-peak window that is less than ideal for customers – while Southern Nevada now has a peak period that is three hours long, from 6-9 p.m., and is easier for customers to adhere to.
It’s easier for a customer to alter their energy use for a few hours in the evening (6-9 p.m.), rather than a large part of their day (3-9 p.m.). While some common high energy usage behavior, like cooking dinner, will almost always happen during the peak period, other actions like running the washing machine or dishwasher can be shifted to earlier or later in the day. A three hour on-peak window makes these altered behaviors easier to adopt without causing significant strain on the user.
WRA successfully presented analysis and testimony before the Public Utilities Commission of Nevada in 2023, championing the shorter, three-hour peak period that was adopted in the south. While this was a big win, it leaves residents in Northern Nevada facing higher bills with fewer options to reduce them.
Northern Nevada needs better TOU rate design
Unfortunately, the benefits of TOU rates have not been realized for Northern Nevada residents due to a poorly timed residential TOU rate and lack of information offered by the utility. Less than 1% of NV Energy’s customers have opted in to the TOU rates. This is in stark contrast to some utilities in the West that have a participation rate of over 50% in their time of use offerings. Low enrollment in the TOU rate points to unattractive rate design, and changes to the length of the peak period are needed to incentivize greater opt-in rates.
To make voluntary TOU rates enticing to customers, the utility must first design a rate that allows customers to benefit from their altered energy use by seeing their bill decrease. Changing behavior patterns is hard – even with the most well-intentioned users – and seeing tangible benefits can help sustain lasting change. Low enrollment in the TOU rate points to unattractive rate design – customers in the northern service territory deserve a rate that prioritizes easy adoption and an actionable path to lower their power bills. NV Energy could incentivize this by shortening the peak period from six hours to three in the northern territories.
WRA advocating for Nevadans
Currently, the peak period offered by NV Energy in Northern Nevada isn’t structured to truly benefit consumers, leaving potential savings and renewable energy solutions on the table.
NV Energy has historically failed to provide, and communicate, an adequate option for customers to capitalize on these benefits, but the rate currently offered in Southern Nevada could be a new start. Northern Nevadans deserve a TOU rate offering they will want and can reap benefits from.
Maintaining the status quo takes power away from Northern Nevada residents and removes real financial incentives to reduce emissions in the state.
WRA is leading the effort to establish a better TOU rate design in Northern Nevada, has submitted testimony and analysis, and will intervene in an official rate case from Aug. 12-16. The Public Utilities Commission of Nevada will review the case and publish their decision in September.
