All You Need to Know About Dynamic Electricity Pricing Plans

Electricity is one of the things that households can’t afford to stay without. It powers home appliances and simply put, it powers your home. However, electricity costs can skyrocket if you don’t have some few hacks that will save you money.

When something is on high demand, its price tends to go up. However, most electricity consumers pay a flat rate on a monthly basis regardless of the time it’s consumed. Electricity generation varies with time. It is high during the day and it reduces during the night also depending demand from the community.

For instance, when population returns to their homes in the late afternoon and early evening, electricity demand goes up considerably. At the times, your favorite Netflix show is probably on, you’re cooking dinner or throwing clothes in the laundry. At those times, power companies initiates “peaker plants” which are a type of limited-use power plant powered by natural coal or gas.

The process of meeting the electricity demands during the peak times comes with a lot of costs to the electrical companies. The companies often pass down the costs to the end consumer through a higher overall rate. This also means you could be overpaying for electricity use when washing your clothes at an off-peak hour.

Many electrical utilities are increasingly offering rates that are dependent on the cost of electricity production. In states such as Massachusetts and California the rate plans are actually mandated thorough state legislation. Other regions are just realizing that consumers like these plans. Depending on an electricity company or state, these plans are referred to as “time-varying rate plans” or “dynamic pricing plans”.

Electrical companies also use many other models for these plans to reward customers with the lowest prices when using electricity during the less costly times of production. Here are the common types of plans offered by any prepaid electricity companies.

Critical Peak Rebate

With this plan, the utility pays consumers for the power they are able to save during the peak hours of certain critical event days. This plan is designed to make people reduce their power consumption during the times when there is a very high usage. However, you will probably not experience any increase in power bills even if you’re not able to reduce power consumption during that time.

Real-Time Pricing

With this plan, the price you’re charged varies every hour to reflect the change in the cost of electricity production. Sometimes, the prices are predetermined, and you can see the prices you are going to pay in the next day and optimize your consumption accordingly. You can save money with this plan by adjusting one or two energy-intensive tasks to consume less during costly hours.

Time-of-Use Pricing

This plan involves breaking down a day into several intervals with different prices and remains that for the entire season. The intervals can be off-peak, interim prices and peak. This method of pricing is designed to discourage people from consuming a lot of power during peak hours when costs of production are higher and encourage consumption through lower prices.