Sometimes, we hear people complain about unfair or wrong electricity pricing. They may say something like, “there is no way I used twice as much electricity though my bill doubled.” Well, they are almost always right. (Occasionally, we see some device start malfunctioning that is actually using more electricity.) However, thinking that somehow there was a major rate hike they didn’t hear about is usually not true. Some people go so far as to shop for a new utility company.

The utility industry is regulated, so that can’t price gauge anyone. They can’t even change pricing policies without going through a bunch of hoops. This regulation is annoying sometimes, but it’s a good thing, like public education and public roads. It’s annoying because regulation make things seem cryptic.

We wrote about electricity pricing before explaining what might be causing high electric bills. We examined some of the cryptic text inside the electric bill. If you haven’t read this article, please check it out. Let’s go over tiered pricing and time of use again.

Keep in mind that a utility company doesn’t set prices to make more money (thank goodness). They set prices to maintain the electric grid for everyone in region.

• Tiered Pricing: This is the reverse of getting a bulk discount a Costco or Sam’s Club. In tiered pricing, the more crackers you buy, the higher you are paying per cracker. Yup. You are being encouraged to buy a regular sized box of crackers. On your bill, you will see “kWh,” instead of a cracker. kWh stands for kilowatt-hour, representing a unit of energy used. On your bill, you can see that the price per kWh actually goes up the more you use.
• Time of Use Pricing: This is the reverse of a holiday sale, e.g. Black Friday. In a store, when everyone is into buying stuff, they offer big discounts to encourage shoppers to buy more. Again, the utility company wants the opposite of that. So, when everyone wants to use more electricity at the same time, there is “peak demand.” Utility companies will raise the price you pay per kWh.

Both of these pricing schemes are laid out upfront and cannot arbitrarily change because the industry is regulated. So, lots of analysts figure out what are good and fair pricing plans, and the utility companies have to stick to them. There are changes, of course, and they must give everyone notice. For example, all California utilities are moving to Time of Use (TOU) pricing by the year 2020.

As we’ve said before, a utility company worries about overloading the electric grid. It’s very expensive and bad for the environment to handle “peak demand,” so higher prices are there to set brakes on unexamined use of electricity. For example, to avoid rolling brownouts during hot summer days, people should be discouraged to keep a giant home setting their thermostat to 55 degrees.

So, before you go on a quest to find an alternative utility company with better prices (which is going to be hard), we recommend something easier first.

First, Eliminate Unnecessary Waste

The easiest thing to do is to get rid of ongoing waste of electricity. No matter what pricing plan you are under, this ensures that you aren’t paying for extra expensive electricity for nothing. We have covered a lot of this in our three-part series on idle load. Most of the things you need to do is just to start using smart strips or smart plugs and timers. They are very affordable and often don’t require hiring expensive professional service.

Change When You Do Things

If you are a Californian who is about to go to Time of Use (TOU) pricing. Check out when the peak demand times are for your utility, consider what devices you can run at time slots outside of the peak times. If you can, even consider the low demand time slots. Some easy ones for a lot of people are the following:

• Program to run dishwasher in the middle of the night.
• If you have an electric dryer, do fuller loads or run it during low peak times
• Adjust thermostat during hot summer days when you’re not even home
• Reduce or even turn off water pumps during peak times. Water pumps include fountains, swimming pools, aquariums, and the notorious recirculation pump.

Check for Better Rate Options

Utilities often have a wide variety of rates. Give them a call to find out if you are enrolled in the best rate plan, given your specific energy use.

Consider Installing a Solar PV

This is an investment, so we recommend this last to get cheaper electricity rates. We take a financially conservative stance when it comes to installing solar panels. Check out our articles Is Solar a Good Investment and Can I Save Money Installing Solar Panels?

Like any investment, if Solar PV works for your situation, it’s a great thing. Do some research and assessment first to see if it’s a good investment for you.

Note to Californians: If you are a Californian, keep in mind that California law requires electric rates to shift to Time of Use by 2020, and some believe this will penalize those with solar PV installed, because the power is being generated at a time when the grid already has too much energy.

If you have already reduced the wasted electricity in your home as much as you can, it may be time for you to consider purchasing a solar PV system for your home. Prices of Solar PV technology have been decreasing rapidly, from over $8 per watt in 2010 to less than $4 per watt (installed) in 2015. See related article here. Generally, if you are paying over 25 cents/kWh for your electricity, producing some portion of your electricity through a Solar PV system makes economic sense today.

To determine how many watts of solar PV you need, a common rule of thumb in California is that one installed watt of Solar PV produces approximately 1.4 kWh per year. This varies with location and shading. For more information on this calculation, see a reference here.

Note that your electric rate from your utility will probably drop as you add Solar PV, and the optimal target would be to produce enough energy with Solar PV such that your electric rate from your utility is equal to or slightly below the effective electric rate from your PV system.

Find a local Solar installer and get a quote. They will look at possible sites for the panels, how much shade there is, how much you should install in order to reduce your electric rates as much as possible, and other issues. Try a tool from Google that helps.