A time-of-use tariff charges a different price for electricity depending on the hour of the day, rather than one flat rate around the clock. Move some of your heavier use into the cheaper hours and you pay less for the very same kilowatt-hours. Fail to move anything, or pile usage into the dear window by accident, and you can finish worse off than on a plain single rate. It is a tool that rewards households able to shift load and quietly penalises those that cannot.
How a flat rate hides the truth
A standard single-rate tariff charges the same pence per unit whenever you draw it, three on a weekday afternoon or three in the morning, no difference. That is simple, but it bears little relation to what is actually happening on the grid. Electricity is far cheaper to produce and deliver at some moments than others: overnight when demand collapses, or on a blustery afternoon when wind output is high and there is more power than the country needs. A flat rate blends all of that into one averaged number, so steady daytime users effectively subsidise the quiet hours and nobody has any reason to change when they use power. A time-of-use tariff pulls those hidden differences into the open and lets you act on them.
Not the same as Economy 7
Anyone who grew up with storage heaters will recognise the idea from Economy 7, which hands you roughly seven cheap night-time hours and a dearer day rate, usually paired with night storage heaters or an immersion. Modern time-of-use tariffs are descendants of that, but they reach further. Instead of a single fixed night block, they may carry several price bands across the day, or a price that changes every half hour to track the wholesale market. The Economy 7 guide covers the classic two-rate version in detail; the rest of this article is about the newer, more flexible kind that a smart meter makes possible.
The two main shapes
Broadly there are two flavours. The first is a static off-peak tariff: a fixed cheap window, often a few hours overnight or sometimes a short cheap slot in the small hours, a standard rate for most of the day, and in some cases a raised peak band in the early evening. You know all the prices in advance and they never move, so planning around them is straightforward. The second is a dynamic, half-hourly tariff, where the price for each half-hour slot is published a day ahead and follows the wholesale cost. On a windy night that can drop to very little, occasionally to almost nothing; during a cold, still evening the same tariff can climb well above a flat rate for a couple of hours. One rewards a fixed routine, the other rewards paying attention or automating the response.
What you need to take part
The common requirement is a smart meter recording your use in half-hourly chunks, because the supplier has to know not just how much you used but exactly when. The smart meters guide covers how that recording works and the privacy questions around it. Most modern smart meters can run in this half-hourly mode, though some of the earliest ones need a settings change or, occasionally, swapping out. You need no special wiring for the tariff itself, but devices that can store the cheap energy change the maths entirely: storage heaters, a hot-water cylinder, an electric car or a home battery all turn cheap hours into something genuinely worth chasing rather than a minor convenience. For electric cars specifically, the dedicated EV tariffs guide covers the overnight charging deals built around exactly this idea.
Who saves and who loses
The whole game is load-shifting, taking flexible and heavy uses and moving them into the cheap hours. The dishwasher and washing machine set on a delay timer, an electric car charging overnight (the charging times guide goes into this), an immersion or storage heaters topping up off-peak, a home battery filling when power is cheap and discharging when it is dear. A household with one or more of those can save real money every week. A flat that draws electricity steadily through the day and evening, with nothing large to move and a busy teatime peak, may simply pay more than it would on a plain single rate. The tariff does nothing for you on its own; it only pays if your home can bend its demand around the prices.
A worked example
Suppose a household has 8 kWh of shiftable load a day: a wash, a dishwasher cycle and an electric-car top-up of a few miles. On a flat tariff at an example 28p per unit, that 8 kWh costs about 2.24 a day. On a time-of-use tariff with an example overnight rate of 10p, shifting all 8 kWh into the cheap window costs 80p, a saving of roughly 1.44 a day, or somewhere near 500 across a year if held to. Now picture the same household leaving everything running on a peak rate of, say, 40p because nothing got shifted: that 8 kWh would cost 3.20, more than the flat tariff would have charged. The numbers swing both ways, which is precisely the point of the design. Put your own usage and your tariff's actual bands through the running cost calculator to see which side of the line you fall on.
Mind the peak
The trap with these tariffs is the expensive window, typically late afternoon into the evening when the country comes home, switches everything on and starts cooking. On a static off-peak deal the peak band might be a fixed few hours at a raised rate; on a dynamic tariff a cold, still evening with little wind can push the half-hourly price sharply higher for an hour or two. A whole night of cheap savings can be wiped out by twenty careless minutes at peak time with the oven, kettle, tumble dryer and immersion all running together. The discipline is to keep big loads out of that window, and ideally to coast through it on a battery or simply do less, leaving the heavy jobs for later when the price has fallen back.
Automation does the heavy lifting
Organising your life around electricity prices sounds exhausting, and done by hand it can be. In practice most of the benefit comes from a handful of things that look after themselves. Appliance delay timers start the wash overnight without you waking up. A smart car charger or the car's own scheduler fills the battery in the cheap window automatically. A home battery and many heat pump and immersion controllers can be told to favour the off-peak hours and largely manage themselves after that, and a solar battery in particular can charge when power is cheap and carry the house through the evening peak. Set those once and the tariff works quietly in the background, which is the difference between a deal that pays and one that becomes a chore you abandon after a fortnight.
Deciding whether it suits you
Two questions settle it. First, do you have flexible heavy loads you can genuinely move: an electric car, storage heaters, a hot-water cylinder, a battery, or at least appliances you are happy to run overnight on a timer? Second, are you willing to shape your day a little around the prices, or to automate it so you never have to think? If both answers are yes, a time-of-use tariff can take a meaningful slice off the bill. If you have almost nothing to shift and no appetite for juggling, a straightforward single rate may serve you better and worry you less. Before switching, check that your meter supports half-hourly readings, compare a tariff's full set of rates rather than only the eye-catching cheap one, and be honest about how your household really uses power across the day.