Exploring the Power of T.O.U. Tariffs

Published: 15/05/15

For the uninitiated a T.O.U. tariff refers to 'Time of Use', an increasingly prominent feature of the smart utility industry landscape. In our latest blog post we explore some of the features of this type of tariff.

The advent of electricity smart meters coupled with T.O.U. tariffs is beginning to change when power is consumed and how it is charged. Long term this could be a potential death knell for the 'one size fits all' approach to billing. Ultimately smart T.O.U. is an interesting development which enables consumers to have more control over cost and be more aware of their usage, which can only be a good thing.

But are T.O.U. tariffs anything new? In some ways the answer to that question depends on your terms of reference. 'Off Peak' tariffs have been around for a long time, providing an incentive for customers to consume energy at times of lower overall demand in return for a discounted rate. This enables utilities to balance demand more evenly and reduce peak load. In the UK, some 13% of customers are on 'Off Peak' tariffs. However, smart technology is providing a new dimension to time of use charging.

When smart metering is coupled with an online customer portal, (enabling detailed usage statistics to be analysed and acted upon), consumers have a greater degree of insight and therefore control. Furthermore it is anticipated that the number of T.O.U. product offerings will multiply as consumers become more aware of their usage patterns and search for billing solutions which best meet their individual needs. Therefore 'time of use' tariff structures are likely to evolve and become more prevalent.

In general, T.O.U. tariffs are generally well-received by users. A 2012 Ipsos Mori survey conducted on behalf of UK consumer body Consumer Focus, found that of those customers polled only 12% where dissatisfied. Causes for dissatisfaction were linked to inheriting the tariff from a previous occupier (and therefore it possibly not being a suitable match for the customer's usage patterns), financial issues related to heating systems, or ignorance regarding how the tariff operates and how to make it financially beneficial.

There is certainly evidence to suggest that the adoption of T.O.U. tariffs is on the increase and that there is a high level of customer satisfaction associated, particularly if the savings V's alternative tariffs are significant. This is driven by the tariff clearly delivering benefits to both the consumer, (in terms of financial savings), and the utility, (regarding balancing load and achieving improved generation efficiencies). It is interesting that smart technology has breathed new life into off peak tariffs. As smart metering / customer portals better inform consumers about their usage patterns, we expect to see an increased demand for tariff changes toward time of use, in order to make financial savings.

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