What Is Peak Demand, and How Does It Affect Me?

Mar. 07, 2024

Simply put, peak demand is when consumer demand for electricity is at its highest. New England is a summer peaking system, which means that we typically see the highest demand for electricity in the summer due to the increased use of air conditioning. Summer peaks typically occur in the afternoon on the hottest and most humid days. Peak demand has a significant impact on costs because the more expensive generators are needed to meet the high demand for electricity.

There are two ways one can address any disparity between supply and demand: increase supply or decrease demand. In the energy market, increasing supply would mean significant infrastructure expenditures like new transmission projects or new regional power generation options in operation for all of New England. Neither are expected to occur anytime soon.

Decreasing the demand for electricity, on the other hand, costs nothing, and small changes can have a big impact. In Unitil’s service area, peak demand occurs on the hottest days of the year, between 3 p.m. and 8 p.m. Reducing consumption during peak demand can take many forms. It can be something as simple as turning the air-conditioning thermostat up a couple of degrees or waiting until late evening to run the dishwasher.

Air-conditioning equipment is used in three-quarters of homes in the United States, at an annual cost of $29 billion to homeowners. (Source: energy.gov)

Unitil recently announced the availability of time-of-use (TOU) billing, which incentivizes customers to shift the bulk of their energy consumption to off-peak times. This program is a departure from the traditional one-size-fits-all approach to billing and gives consumers more control over their electric bills. In exchange for lower rates for off-peak energy consumption, time-of-use customers agree to pay a higher rate during the hours of peak demand.

Time-of-use billing is just one way Unitil is working to reduce peak demand. Here are some ways you can help:

Shift the use of large appliances – such as the dishwasher and clothes dryer – to off-peak hours. Many appliances have a delayed start feature that makes this easy to do.
Push that air-conditioning thermostat up a couple of degrees. One or two degrees might not seem like much (you may not even notice the difference), but every little bit helps.
Avoid using the oven on summer’s hottest days, as this places an even heavier burden on your cooling system. Use the microwave or grill instead.
Unplug any unused electronic devices, and consider installing occupancy sensors for lighting.
Keep your air-conditioning unit in tip-top shape so it can run at peak efficiency. This includes cleaning or changing filters and keeping exterior equipment free from debris.
If you have a pool, adjust when you run the pump to avoid peak hours.
A programmable thermostat can minimize heating and cooling costs when you’re away from home and ensure maximum comfort upon your return.
Replace aging appliances with ENERGY STAR® models. If your refrigerator is more than 10 years old, that’s a great place to start. As climate change continues to result in extended periods of extreme weather, a proactive approach to energy consumption will help ensure that electricity is available on demand, when it’s needed the most.

Key Takeaways

Peak demand is a term used to describe a period of time in which consumer demand for energy is the highest.
Reducing the impact of peak demand can be accomplished by increasing the supply of electricity or decreasing the demand for it.
Peak demand has a significant impact on energy prices because distribution channels must be capable of delivering electricity at maximum demand levels at all times.

Energy prices are still high across the nation, and with them, utility bills. But it's important to understand that the energy you use at home doesn't always cost the same every hour of the day. While the price of electricity remains steady for standard electricity plans, utility companies are increasingly offering time-of-use plans, which charge more for electricity during peak hours but offer cheaper service during off-peak times -- which means you can actually save money by running appliances like your dishwasher or washing machine during off hours.

Think of it like the surge pricing that Uber uses. When electricity is high in demand and the grid is strained, with lots of people plugged in, then prices are higher. When things aren't so busy, you can get more favorable pricing. If your utility company has you on a time-of-use plan, you can take advantage by figuring out peak hours and off-peak hours and timing your electricity use to the periods when electricity is at its cheapest. We've also got tips on the best time of day to do laundry to save money, and how to lower your water bill.

What are peak hours?

In a time-of-use electricity plan, peak hours -- sometimes referred to as on-peak hours -- are the hours of the day during which demand for electricity is the highest. During this time period, you will be paying the highest amount per kilowatt-hour used.

Some electricity use is going to be unavoidable, whether it's your refrigerator keeping your food cool or your security system that's always on and protecting your home. But peak hours are a bad time to do tasks that can wait. If you're running large appliances, whether it's your dishwasher or washing machine, it's going to cost you extra during peak hours.

What are off-peak hours?

Conversely to peak hours, off-peak hours are the times when electricity prices are cheaper. This is typically the case because there are fewer people trying to access the grid during these hours, meaning there is less overall demand and you won't have to pay a premium for each kWh that you use.

Off-peak hours are a great time to do those more energy-intensive tasks that you may have waiting for you. While it might not be the most convenient, if you happen to be home during off-peak hours, you can save money on your monthly electricity bill by timing your tasks to these time frames.

Why do utility companies use time-of-use rates?

Utility companies know when stress on the grid is going to be at its highest. In order to make sure the grid can serve all of these customers, they need to make sure that power plants are operational and meeting all of the demand. When demand increases, these companies may have to generate more electricity, which can cost more. They either need to generate that power in advance to meet the peak or purchase extra energy from other sources. That additional expense is passed on to the consumer through time-of-use rates, which charge you more when you use electricity during peak hours.

When are peak hours?

Peak hours vary depending on the time of year and region of the country. As a general rule, think of peak hours as the time during which most people are getting home from work for the day. This is when people are turning on their lights, firing up their TVs and settling into their home for the night -- all of which requires more electricity than usual.

Here's an overview of peak and off-peak hours by Eastern, Central, Mountain and Pacific time zones.

Summer

Time zonePeak hoursOff-peak hours Eastern 2-6 p.m.6-2 p.m. (next day)Central 1-5 p.m.5-1 p.m. (next day)Mountain 8 a.m.-11 p.m.11 p.m.-8 a.m.Pacific 5-9 p.m.9-5 p.m. (next day)

Winter

Time ZonePeak hoursOff-peak hours Eastern 6-10 a.m.; 6-10 p.m.10 a.m.-6 p.m.; 10 p.m.-6 a.m.Central 5-9 a.m.; 5-9 p.m.9 a.m.-5 p.m.; 9 p.m.-5 a.m.Mountain 7 a.m.-10 p.m.10 p.m.-7 a.m.Pacific 6-10 a.m.; 5-8 p.m.10 a.m.-5 p.m.; 8 p.m.-5 a.m.

Additional money-saving tips

Typically, weekends are considered to be off-peak hours for the full day. This means that if you can time your energy-intensive tasks to Saturday and Sunday, you can typically save yourself some money when it comes to your monthly energy bill. Equipped with the knowledge of when peak hours occur and what times are considered to be off-peak hours, you can figure out how to time your use of major appliances to off-peak hours and keep your energy costs down. You can also consider purchasing tools like a solar battery that will provide you with an energy reserve so you don't have to draw from the grid during peak hours.

You can also use this knowledge to save more by minimizing the amount of electrical usage that you require during peak hours. You can unplug your appliances that you aren't using, make sure that your thermostat is set properly so your furnace is not running as much during peak hours, and utilize "sleep" mode on things like your computer and TV to make sure they aren't using unnecessary electricity that will cost you more. You may also want to consider using motion sensors in your home that can be equipped to interact with other electronic devices. For example, if you aren't home, there is no need for your lights to be on. Setting them to a motion sensor would ensure they won't turn on unless you're home and moving around.

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