Understanding Time-of-Use (TOU) Rates: Strategies for Commercial Energy Savings

Time-of-Use (TOU) electricity rates represent fundamental change in how utilities price electricity, moving from flat per-kWh rates to varying prices reflecting actual system costs during different times. During peak demand hours (typically 2-8 PM summer afternoons), electricity prices are 2-5x higher than off-peak hours, reflecting expensive peaking power plant operation. Sophisticated commercial customers shift energy consumption to off-peak hours, capturing 10-20% total energy cost reduction through consumption timing alone. For commercial businesses with operational flexibility, TOU rate optimization represents pure profit opportunity requiring no capital investment.

This comprehensive guide explains TOU rate mechanics, explores consumption-shifting strategies, quantifies realistic savings potential, and provides implementation frameworks for commercial energy optimization.

Are You Overpaying? A Complete Breakdown of Illinois Time-of-Use (TOU) Rates for Businesses

TOU Rate Structure: Time-of-use rates divide billing period into distinct time blocks with different prices reflecting grid system economics. Typical structures include:

Peak Period (2-8 PM summer weekdays): Highest prices, typically $0.25-0.40 per kWh, reflecting maximum demand on electric grid and requirement to operate expensive peaking power plants.

Mid-Peak Period (7 AM-2 PM and 8 PM-10 PM summer weekdays): Moderate prices, typically $0.12-0.18 per kWh, reflecting moderate system demand.

Off-Peak Period (10 PM-7 AM all days, all day weekends/holidays): Lowest prices, typically $0.06-0.10 per kWh, reflecting low system demand and ability to run efficient baseload generation.

Winter rates are typically lower due to reduced cooling load and excess generation capacity. Peak periods are narrower or eliminated entirely during winter months.

Blended Rate Comparison: For commercial customers currently paying flat rates of $0.12-0.15 per kWh regardless of time, TOU rates represent dramatically different economics. If customer can shift 30% of peak-period consumption to off-peak periods, blended rate drops significantly. Example calculation:

Current flat rate: 50% peak at $0.12, 50% off-peak at $0.12 = $0.12 blended
With TOU: 20% peak at $0.35, 30% off-peak at $0.08 = $0.107 blended
Savings from consumption shifting: approximately 11% total cost reduction

For commercial customers currently paying $50,000 annually, 11% reduction saves $5,500 annually—substantial return on operational adjustments enabling consumption shifting.

Shift and Save: 4 Game-Changing Strategies to Beat Illinois' Peak Energy Rates

Strategy 1: HVAC Pre-Conditioning and Load Shifting
Pre-cool or pre-heat buildings before peak-rate periods, minimizing active HVAC operation during expensive peak hours. Cool buildings to 68-70°F during mid-peak hours (7 AM-2 PM) when rates are lower. During peak periods (2-8 PM), allow temperature to drift toward 74-76°F (comfortable upper limits for summer occupancy) without active cooling. Building thermal mass absorbs accumulated heat while peak-period electricity consumption approaches zero. Evening operation resumes after 8 PM when rates drop. This strategy requires only operational procedure changes—no capital investment—and often reduces peak-period HVAC costs 30-50%. For facilities with $15,000-30,000 annual HVAC costs, peak-period reduction easily saves $5,000-15,000 annually.

Strategy 2: Production Scheduling Optimization
For manufacturing or businesses with flexible production schedules, shift energy-intensive operations to off-peak hours. Defer discretionary tasks (equipment maintenance, water heating, material processing) to off-peak periods. Front-load peak-period operations with essential high-priority work, deferring less time-sensitive work to off-peak. Production scheduling optimization enables 10-20% off-peak energy consumption increase while reducing peak consumption 20-30%, creating favorable cost impact. For manufacturers with $200,000+ annual electricity costs, production schedule optimization often saves $20,000-50,000 annually without production disruption.

Strategy 3: Refrigeration and Cold Storage Management
Facilities with refrigeration or cold storage systems can pre-cool storage before peak periods, allowing temperature drift during peak hours while remaining within acceptable ranges. Produce, dairy, and other temperature-sensitive goods can typically tolerate 2-3°F temperature variation during short (1-2 hour) peak periods. Allowing refrigeration systems to coast during peak periods while operating aggressively during off-peak periods reduces peak consumption 10-15% with minimal product impact. For facilities with $30,000-60,000 annual refrigeration costs, this approach saves $3,000-9,000 annually.

Strategy 4: Battery Storage and Demand Charge Reduction
Battery systems charging during off-peak periods and discharging during peak periods enable maximum consumption shifting benefit while simultaneously reducing demand charges. A 50 kWh battery system charging during off-peak ($0.08/kWh = $4.00 cost) and discharging during peak ($0.35/kWh = $17.50 value) captures $13.50 per complete charge-discharge cycle, or $40.50-67.50 daily for 3-5 daily cycles. Monthly benefit ($1,215-2,025) justifies battery system investment within 2-4 years. Combined with demand charge reduction benefits, battery-enabled TOU optimization often achieves full payback within first 2-3 years of operation.

Navigating ComEd & Ameren TOU Programs: A Guide for Illinois Commercial Customers

ComEd TOU Programs: ComEd offers multiple time-of-use rate options for commercial customers. Real-Time Pricing (RTP) adjusts hourly prices reflecting actual system conditions, enabling maximum optimization potential for flexible customers willing to actively manage consumption. Peak Time Rebate (PTR) provides simplified pricing with designated peak periods (typically 2-8 PM summer weekdays) where customers receive bill credits for consumption reduction compared to baseline. Time-of-Use rates provide fixed pricing for predetermined time blocks, offering price certainty compared to real-time pricing volatility.

Optimal ComEd program selection depends on facility's operational flexibility and risk tolerance. Facilities with significant flexibility should consider RTP programs maximizing optimization potential. Facilities preferring price certainty should choose TOU programs. PTR programs appeal to demand response-capable facilities seeking additional revenue alongside TOU optimization.

Ameren Illinois TOU Programs: Ameren administers similar programs in Illinois service territory. Time-of-Use rate options, demand response programs, and real-time pricing alternatives are available. Ameren's Rider RTP (Real-Time Pricing) enables hourly pricing optimization. Rider ECTOU provides time-of-use rates with fixed peak/off-peak periods.

Program Selection Process: Utilities provide TOU rate option comparison enabling customers to model savings under different rate structures using facility consumption history. Customers should request rate options, evaluate estimated annual costs under each option, and select approach maximizing expected savings based on facility's operational flexibility.

Unlock Your Savings: How a Custom TOU Strategy Can Transform Your Bottom Line

Consumption Analysis and Baseline Establishment: Begin with detailed 12-month consumption analysis by time-of-day and day-of-week. Identify peak-period consumption proportions. Facilities with 40-50% consumption during peak periods have significant optimization potential; facilities with 60-70% peak consumption may struggle achieving substantial TOU savings through operational changes alone and might benefit from battery storage investment.

Operational Flexibility Assessment: Evaluate facility's ability to shift consumption timing. Manufacturing with flexible production schedules can achieve substantial shifting. Retail with fixed customer service hours has limited shifting opportunity. Healthcare and emergency services cannot reduce consumption during peak periods without compromising core mission. Realistic assessment of achievable flexibility determines appropriate savings targets.

Target Savings Calculation: Model consumption scenarios under various efficiency assumptions. Conservative scenario assumes 5-10% peak consumption reduction through operational changes, saving $2,500-5,000 annually. Moderate scenario assumes 15-20% reduction, saving $7,500-10,000 annually. Aggressive scenario (incorporating battery storage) assumes 30-40% reduction, saving $15,000-20,000+ annually. Target selection should balance potential savings against operational requirements and investment tolerance.

Implementation Planning: Develop detailed action plans addressing specific operational changes enabling target achievement. Assign responsibility for implementation. Establish performance monitoring procedures tracking actual results against targets. Regular performance review (monthly initially, quarterly once optimized) maintains focus and enables course correction if actual results fall short of projections.

For comprehensive facility optimization guidance, review our detailed article on commercial energy audits and optimization strategies.