Will Energy Prices Rise When Time-of-Use Rates Become Mandatory in California?

You’ve probably heard about California’s new energy laws that passed last year and are starting to go into effect now. But what do they mean for you, the residential consumer? Between IOUs, TOU rates, and tiers of energy users, it can sound like pretty complicated stuff.

But relax—as a residential energy user, it’s not going to be the end of the world, and it’s pretty easy to understand. We’re going to walk you through the changes and explain, using clear examples to show how they’ll affect you.

How Energy Rates Are Changing in California

One major change in California’s energy laws is the way the billing system is structured. In the old system, there were four tiers of energy users; you might be in a different tier depending on the time of the year, and different tiers paid different amounts. If you used your AC a lot, you might end up in the highest tier — the same tier as large companies and other massive energy consumers. The old system meant that big energy users paid a lot, and often folks who used little energy didn’t pay as much. But it also made it easy for homeowners to end up in that top tier, which wasn’t ideal. Even more, because energy was unfairly cheap for people on the bottom tiers, it gave people in those tiers little reason to upgrade their homes or invest in solar power.

The old system meant that big energy users paid a lot, and often folks who used little energy didn’t pay as much. But it also made it easy for homeowners to end up in that top tier, which wasn’t ideal. Even more, because energy was unfairly cheap for people on the bottom tiers, it gave people in those tiers little reason to upgrade their homes or invest in solar power.

The New System

The new laws do away with all that complicated stuff in favor of a simple plan that’s fair to everyone. If you’re a residential consumer of power, you’ll be paying the same rate for energy as other people in your situation; you won’t be able to slip into the top tier accidentally and wind up paying more.

If you’re a commercial power user (or anybody else who uses 400% or more power than the average user), you’ll be paying at a higher rate. This means that you won’t be subsidizing low-power users’ energy costs, but they won’t be paying for yours, either.

To incentivize home energy-efficiency upgrades, the new system will have varying rates based on the time of day that people use energy. This helps conserve energy across the board and also puts less stress on the grid. It means that it’ll cost more to run your AC all day long than only when you’re home, and it will incentivize people to use less power during times of peak usage or pay more during those hours.

Will My Bill Get Bigger?

That’s entirely up to you. Time-of-use rates follow the basic rules of supply and demand, which we all remember from high school economics. When there’s a lot of energy “lying around” because nobody else is using it, then it’ll be cheap to use it yourself. But when 5 PM rolls around, and everybody is just getting off work, turning on the AC, TV, computers, and lights — suddenly, there’s less energy to go around and it’s more expensive to use it yourself.

There are a couple ways to mitigate this. The first is simple: use energy during times of the day when it’s cheaper to do so. That’s doable for many customers, and if your work or sleep schedule doesn’t line up with the usual nine-to-five, you’re probably already doing this and your rates might go down significantly when the new system goes into action.

But that doesn’t work for everyone. And we can’t always control our schedules or the time that we need energy. The new system is designed to be fair, but also to encourage upgrades to your energy efficiency and possibly sources of alternative energy, like solar panels. Along with rebates and financing, the new rate system is another way the government is trying to help homeowners make their homes as energy-efficient as possible.

With these upgrades, you’ll see your energy bill drop no matter what time of day you use energy, and that’s a good thing. Whether you want to insulate your attic or seal your ducts, install solar or put in a heat pump, the new system is designed to encourage you in your endeavors. And we’re here to help: Bell Brothers offers a free energy assessment and is happy to come out to your home and help you figure out how to save money on energy. If you decide to upgrade, we’ll walk you through the rebate or financing process, and we’ll complete all the work. Time-of-use rates are coming — whether that’s good news or bad news is entirely up to you.