The Great Time-of-Use Migration

time of use

California is rapidly transitioning to a green energy economy while it faces an aging energy distribution system. Residents, businesses, and local governments are getting on board by installing solar panels, which feed the grid with solar energy on sunny days through Net Energy Metering. To alleviate some strain on the grid during times of peak energy consumption, the CPUC voted to transition all Californians to Time-Of-Use (TOU) rates by 2020.

 

What are Time-Of-Use Rates?

Most California homes are currently on a tiered rate system, in which they are charged more after using a certain baseline allocation of electricity. A home’s assigned baseline depends on the time of year and climate of its location.

SCE Time of Use bill
This homeowner was charged 56% more for electricity after reaching Tier 2. If she reached the third tier, her cost per kilowatt-hour would double.

Time-of-use rate structures charge differently for electricity based on the time of day, season, and day of the week. Certain periods of time are deemed “peak times” and can cost significantly more than off-peak times. With some careful planning, you can save on costs with TOU by scheduling high-power activities like running the dishwasher, doing laundry, and electric vehicle charging during off-peak times. Many solar system owners benefit from the current TOU structure because they are using their solar energy when the grid is the most expensive.

Southern California Edison (SCE) currently has six residential TOU rate plans available, and Pacific Gas and Electric (PG&E) has three. Both utilities have rate plans especially for solar customers and electric vehicle owners. Santa Barbara County is unique in that it has two utility providers: PG&E in north county, and SCE in the southern half of the county. Ventura County is also served by SCE.

time of use rate california
Time-of-use rates charge differently for electricity throughout the day.

When and how are rates changing?

Per the CPUC’s ruling, almost all Californians will be required to enroll in time-of-use rates by 2020, but both PG&E and SCE have pushed to extend this deadline. Both utilities will be offering new TOU rate plans for the upcoming transition. These are still being finalized; we will post an update as soon as these detailed plans become available.

SCE will be randomly selecting customers to migrate to TOU rates in groups throughout 2019, the first group to transition on March 1st. They have promised customers will be notified by mail five months ahead of time, so the first round of customers should have started receiving letters in November 2018. SCE will follow up with calls and emails to make sure everyone has chosen a TOU rate in time.

PG&E plans to reveal a complete rate selection in October 2019 and will randomly choose groups to introduce to new rates ahead of time. PG&E is making it mandatory for customers to switch rate structures by the end of 2020.

 

What does this mean for current or new solar customers?

Today, the peak billing period for solar time-of-use is either 12-6PM or 2-8PM for SCE, and 4-9PM or 3-8PM for PG&E, depending on your plan. Through Net Energy Metering (NEM), a solar-powered home benefits from peak periods during daylight hours, because the solar system is feeding the grid and receiving utility credit when electricity is more expensive.

Both utilities plan to shift the peak billing period to a later time of day: namely 4-9PM or 5-8PM. This is problematic for solar system owners, as they will be feeding the grid when electricity is cheaper, then after sunset, they will pull from the grid when electricity is more expensive. The change will affect you in different ways depending on when you installed (or plan to install) your solar panels:

SCE Customers:

If you have NEM 1.0:

SCE customers who interconnected their systems before July 2017 are enrolled in NEM 1.0, which grandfathered them into the Domestic tiered rate for 20 years. This rate will no longer be an option after the transition (starting on March 1, 2019.) If they switch to a TOU rate before March 1, they will be grandfathered into one of the current TOU rates for a period of 5 years from their original permission to operate (PTO date). The peak time will be grandfathered for these customers, but the cost per kilowatt-hour will not.

For example, a NEM 1.0 customer can transition to rate TOU-D-T in January to be grandfathered into the peak billing period of 12-6PM. The current peak rate for this plan is 25-41 cents per kilowatt-hour depending on the time of year, but after the transition, this cost may increase.

If you have NEM 2.0:

Solar systems installed after July 2017 were interconnected with NEM 2.0, therefore these homes were automatically enrolled in a TOU rate. NEM 2.0 customers in SCE territory are either on the TOU-D-T or the TOU-A rate. After the transition, they will be grandfathered into their current rate for a period of 5 years from their PTO date.
The peak time will be grandfathered for these customers but the cost per kilowatt-hour will not.

If you are in the process of going solar:

Any SCE customer who interconnects a solar system between now and March 1, 2019 will be grandfathered into one of the current TOU rates under NEM 2.0 for 5 years. After this period all customers will have to choose one of SCE’s new TOU rate plans. Brighten Solar Co. has been using these new rate structures to size our clients’ solar systems.

 

PG&E Customers:

If you have NEM 1.0:

PG&E solar customers under NEM 1.0 are enrolled in the E1 rate, a tiered rate. If they want to keep this rate, they are still eligible for the 20-year grandfathering period. If they choose to switch to a TOU rate, they can be grandfathered into the peak time period for 5 years from their PTO date, but the cost per kilowatt-hour will change.

If you have NEM 2.0:

PG&E solar customers who installed after July 2017 are enrolled in NEM 2.0, in which they are automatically enrolled in rate E-TOU-A. These customers are eligible to keep their current rate for 5 years from their permission to operate date.

If you are in the process of going solar:

As long as you are interconnected with PG&E before October 2020, when the new default TOU rates are implemented, you are grandfathered into E-TOU-A for 5 years from your PTO date.

PG&E solar customers with energy storage will also have the option to enroll in PG&E’s electric vehicle (EV) rate plan, but the rate is capped to the first 30,000 customers.

 

Time of Use chart

 

Are you confused? (We don’t blame you.)

It has taken us hours of phone calls, webinars, and reading through documents to understand what these utilities have planned for this transition, and we frequently received conflicting or incomplete information. We will continue to update our customers as we learn more.

One important thing to remember is that these changes, while inconvenient, only slightly impact a solar system’s profitability, and in the long term solar is still a reliable investment and the right thing to do. Installing solar panels on your home makes you less reliant on the unpredictable grid and less reliant on fossil fuels. Installing a home battery system is one way to protect yourself from unpredictable rate changes from your utility. Some home battery systems can even be programmed to anticipate changes in rate and drain when the grid is the most expensive.

Learn more about batteries.

Are time-of-use rates a good thing?

Time-of-use, if utilized properly, is a low-cost way to help California meet its climate goals. Charging consumers less when the grid is rich in green energy like solar could encourage the state as a whole to rely less on fossil fuels. It can also encourage people to install home energy storage to mitigate strain on the grid during peak times.

Unfortunately utility changes like these are often unforeseeable and are expected to continue as our energy system shifts toward renewables like solar. It is one of the reasons why energy storage systems are becoming more popular. We will continue to stay on top of these updates so we can better serve you.

Are you wondering how your electricity costs may change with time-of-use? We are dedicated to helping our customers get on the best rate for their solar system. Contact us with any questions you may have.