Are you looking to take charge of your energy use? And your bills too? Then a time of use (TOU) tariff could be what you need. They’re a smarter way to manage your energy and could be a way to save on your bill.
Let’s take a look at exactly what a time of use tariff is, and if one is a good match for you.
What is a time of use tariff?
The clue is in the title. A time of use (TOU) tariff is an energy plan where the energy price varies, depending on the time of day. In a typical TOU tariff, energy prices are lower during off-peak hours and higher during peak periods, when demand is higher.
The reason for this is two-fold. Firstly, it’s cheaper to produce electricity during off-peak hours, and some of those savings can be passed onto the customer. Secondly, the offer of cheaper electricity is used as an incentive to draw customers away from using it during peak hours and ease the demand being placed on the grid. Think of it as flattening the curve for demand.
What makes a time of use tariff different?
TOU tariffs are different from a regular or standard variable tariff (SVT). The price of energy on the SVT is tied to the energy price cap set by the regulator, Ofgem. You’ve no doubt heard that the price cap is updated every three months. That means the price you pay per unit of energy can change four times in a year – which can make managing your energy bill more difficult.
So, as long as you are willing to change some of your energy-using habits, you could find it easier to manage your bills and benefit from lower prices.
There is also our Next Smart Saver tariff, which is a kind of blend between the two. Next Smart Saver offers three rates over a 24 hour period: peak, off-peak and super off-peak. However, because the discount on the off-peak rate is set at 20% below the SVT, the overall price can vary from quarter to quarter.
Peak vs off-peak times.
Again, this is a term you’re probably familiar with. Peak times are typically when energy demand is highest. This is usually in the morning rush, the late afternoon and the early evening. No surprise here, that’s when most of us are getting ready for the day ahead or getting home and starting to cook or get on with other household chores.
Off-peak (and super off-peak) times are when demand is lower; typically during the day (when few people are at home) or overnight (when everybody is asleep). And as we’ve already mentioned, both producers and consumers can benefit from using energy when it’s cheaper and less demanding on the grid.
Is a time of use or a fixed tariff better for me?
The answer to this question is that it all depends on the kind of user you are. Let’s explain the difference between the two and then we can work out which one is better.
Time of use tariffs are a kind of variable tariff, in that they charge different prices for your energy at different times of the day. All other things being equal they can help you save money, compared to being on a SVT and may even help you save compared to a regular fixed tariff.
A fixed tariff is where the price for your energy is fixed at the same level for all of your contract (You may have heard of tracker tariffs, like our own Next Pledge. This is a variable tariff where your energy prices track just below the SVT). It doesn’t matter what time of day you use that energy, on a fixed tariff you’ll always pay the same per unit of energy.
Fixed tariffs usually offer energy at a discounted price per unit, compared to the SVT. However, it’s worth remembering that the price of energy on the SVT can change depending on what the price cap does. If the price cap drops when you’re on a fixed tariff, then suddenly it doesn’t look like such a good deal.
One important thing to note about a TOU tariff is that you’re helping to balance demand on the grid. As the nation moves towards net zero, you may want to play your part. A time of use tariff is a great way to get involved. And yes, if you’re the sort of person who is happy to charge and run appliances at off-peak times, then you could end up making some cash savings too.
How TOU tariffs differ from Economy 7.
Perhaps, when you first heard of time of use tariffs, your mind went to Economy 7. And yes, this tariff certainly has lower prices at off peak times. However, there are some crucial differences between that old tariff and the latest TOUs. It centres around one piece of hardware: the smart meter.
How does a smart meter work with a time of use tariff?
Economy 7 traditionally works with an old-fashioned meter setup (and this setup stops operating in June 2025) whereas modern TOUs take full advantage of the latest smart meter features.
Smart meters record your energy use in real time and send the data to your supplier. This means accurate billing based on when you use electricity – that’s essential for TOU tariffs. (They also help you monitor and adjust your consumption habits.)
And because of that real time reading, a smart meter lets you take advantage of price changes throughout the day. It can even mean that you don’t have just one off-peak period every 24 hours. You can have several.
For example, our Next Pumped heat pump tariff has three different prices throughout the day. Those prices reflect what we expect it will cost to generate electricity at those different times. As we move forward, you can expect to see more tariffs that allow you to take advantage of fluctuating prices.
Savings with off-peak electricity.
So what do you have to do to save with off-peak electricity? Simple. Move as much of your electricity consumption into the off-peak period as you can.
Let’s use our electric vehicle (EV) charging tariff as an example. Next Drive provides off-peak rates overnight. This allows you to charge your EV at a discounted price. But why not run your washing machine at the same time? Or your dishwasher. Many modern white goods come with timers, so you can easily set them up before you go to bed so that they run during the off-peak period.
It’s this approach that allows you to take full advantage of a TOU tariff.
Can you switch to using off-peak energy?
Most people can switch to using off-peak electricity, but there are certain terms and conditions. Each tariff has its own T&Cs and you should always check those before you sign up.
Most importantly, you’ll need a smart meter. As we already said, you need the accurate billing a smart meter provides so that you are charged properly (you wouldn’t want to pay peak prices for energy you use off-peak). Many homes have smart meters already. But if you don’t, it’s no problem. We’ll be happy to install one where possible, and it won’t cost you anything extra.
Could E.ON Next's smart energy tariff be your perfect match?
Next Smart Saver is our latest “smart energy” tariff. It’s the perfect example of the kind of tariff we spoke of earlier: one that is far more flexible than those old Economy 7 type deals thanks to smart meter technology, that accurately measure and record energy consumption at different times.
On Next Smart Saver, the cost of electricity changes depending on the time of day you use it. This smart energy tariff gives you the option to use electricity at a lower price per kilowatt hour (kWh) during the ‘off-peak’ hours of 5am-4pm and 7pm-2am. Plus there are the ‘super off-peak’ hours of 2am-5am (there’s a higher price during ‘peak’ hours of 4pm-7pm).
In other words there are three times in a 24 hour period where you pay a lower price than the peak hour price.
Do you think you could shift your energy use to fit those hours? Are you happy to set timers on your various appliances so that they only run outside peak hours? Perhaps you’re the kind of person who’s rarely home before 7pm on a weekday? These are the sort of questions you need to ask yourself. But if you’ve taken a long hard look at your habits and are willing to change them, Next Smart Saver could be the TOU tariff for you.
Would you like to know more? Then visit our Next Smart Saver page and see exactly how our latest TOU tariff could work for you.