Time-of-Day (ToD) Pricing
In a nutshell, Time-of-Day (ToD) pricing on electricity simply means charging more for electricity at certain times of the day, when the system demand is highest.
Each and every day, ERCOT’s main website shows the grid’s access to electricity generation and demand. As you will notice, demand usually spikes around 5 p.m., and in order to meet that level of demand, less efficient, more expensive generators have to be turned on. This means that the price of electricity for your electric provider is usually much higher than at other times, such as on nights or weekends.
Other factors that cause wholesale electricity prices to change include the weather and wind speed. Texas’ large wind power capacity means that prices plummet in good wind and can rise if the day is calm. Hot, sunny days can cause AC units to work harder and consume more electricity.
For the electric company, then, it is better for consumers to move their electricity needs to other times of the day. Time-of-day plans are most valuable when shifting large demands for electricity is possible—running the dryer and charging an electric car are some of the biggest examples. But the actual implementation of these plans can get messy for consumers. At a basic level, trying to explain electricity rates that can literally change by the minute gets confusing, and electricity should not be confusing. Furthermore, the money you could save is usually measured in cents. For this reason, many companies do not offer such plans.