California's investor-owned utilities have fully embraced time-of-use pricing for commercial customers. If you manage buildings served by PG&E, SCE, or SDG&E, your electricity cost per kilowatt-hour now swings dramatically depending on when that power is consumed. During peak hours, rates can exceed 49 cents per kWh. Shift that same consumption to off-peak windows and you pay closer to 31 cents. The spread between those two numbers represents a massive opportunity for building operators who understand the schedules and adjust operations accordingly.
Time-of-use rates are not new, but the differential has widened significantly over the past three years. The California Public Utilities Commission has pushed IOUs toward rate structures that more accurately reflect the real cost of generating and delivering power during different periods. For commercial buildings, this means the old approach of treating electricity as a flat commodity cost is no longer viable. Every hour of operation now carries a different price tag, and the buildings that optimize around those price signals will spend substantially less than those that ignore them.
This playbook breaks down the TOU rate structures for each of California's three major IOUs, explains how to read the rate schedules that apply to your buildings, identifies the highest-impact strategies for shifting load away from peak periods, and provides a framework for measuring the savings you capture. Whether you manage a single office building or a portfolio of hundreds across the state, the principles are the same: understand the rate, shift the load, and measure the result.
Understanding TOU Rate Structures in California
Time-of-use rates divide the day into pricing periods, typically three: off-peak, mid-peak (sometimes called partial-peak), and on-peak. Each period carries a different per-kWh energy charge and, in most commercial schedules, a different demand charge as well. The specific hours that define each period vary by utility, season, and rate schedule.
PG&E Commercial TOU Schedules
PG&E's primary commercial TOU schedule is B-20, which applies to buildings with demand above 75 kW. Under the current B-20 rate, peak hours run from 4 PM to 9 PM on weekdays during the summer months of June through September. Off-peak covers all other hours, including weekends and holidays. The summer peak energy charge reaches approximately 49.9 cents per kWh, while the off-peak rate sits around 31.4 cents per kWh. That 18.5-cent spread means a building consuming 100 kW during peak hours pays roughly $18.50 more per hour than the same building consuming 100 kW off-peak.
During winter months from October through May, PG&E compresses the TOU differential. Peak hours shift slightly, and the spread between peak and off-peak narrows to around 8 to 10 cents per kWh. This seasonal difference is critical for planning: the highest-value load-shifting investments pay for themselves during summer months, which is exactly when cooling loads are at their maximum and the most electricity is being consumed.
SCE Commercial TOU Schedules
Southern California Edison's primary commercial schedule is TOU-8, with variants depending on building size and voltage level. SCE defines peak hours as 4 PM to 9 PM on weekdays during summer, closely mirroring PG&E's schedule. The mid-peak period runs from 4 PM to 9 PM during winter weekdays. SCE's peak summer rates for medium commercial customers can reach 45 to 52 cents per kWh depending on the specific schedule and rider charges applied.
A notable distinction with SCE is the treatment of demand charges across TOU periods. SCE applies separate demand charges for facilities-related demand (your overall maximum) and time-related demand (your maximum during peak or mid-peak hours). This dual demand charge structure means that even if you shift energy consumption, you also need to manage your peak demand during on-peak hours separately. A single spike during the 4-to-9 PM window can set your time-related demand charge for the entire billing month.
SDG&E Commercial TOU Schedules
San Diego Gas & Electric's commercial schedules include AL-TOU and DG-R for solar customers. SDG&E's peak period aligns with the other IOUs at 4 PM to 9 PM, but SDG&E has historically maintained some of the highest peak rates in the state. Commercial customers on SDG&E's network can see peak rates exceeding 55 cents per kWh during summer, making the economic case for load shifting even stronger in San Diego's service territory.
How to Read Your TOU Bill
California utility bills for commercial TOU customers are notoriously complex. A typical PG&E B-20 bill might run four to six pages and include dozens of line items. Understanding the key components is essential for identifying where your money is going and where the optimization opportunities lie.
Energy charges by period. This is the most straightforward section. Your bill will show the number of kWh consumed during each TOU period (peak, partial-peak, off-peak) and the rate applied to each. Multiply consumption by rate to get the energy charge for that period. The sum of all period charges equals your total energy cost. This is where load shifting has its most direct impact.
Demand charges. Demand is measured in kilowatts (kW), not kilowatt-hours. Your utility records your highest 15-minute average demand during the billing period, and you pay a per-kW charge based on that peak. Under TOU schedules, you may see separate demand charges for maximum demand (anytime), peak demand (during peak hours only), and partial-peak demand. A building that hits 500 kW during peak but only 350 kW off-peak pays the peak demand charge on the full 500 kW.
Power factor adjustments. If your building's power factor drops below 85 percent, most California IOUs apply a surcharge to your bill. Power factor is a measure of how efficiently your building uses electricity. Low power factor is common in buildings with large motor loads, older HVAC systems, or significant lighting ballast loads. Correcting power factor with capacitor banks can eliminate this surcharge and is often one of the fastest-payback investments available.
Rider charges and surcharges. California bills include numerous rider charges for wildfire mitigation, public purpose programs, nuclear decommissioning, competition transition costs, and other policy mandates. These charges are largely non-controllable, but they add anywhere from 3 to 8 cents per kWh to your effective rate and should be factored into any savings analysis.
Strategies for Optimizing Under TOU Rates
The core strategy is simple in concept: move as much electricity consumption as possible from peak periods to off-peak periods. The practical implementation requires understanding which loads in your building are shiftable and which are fixed.
HVAC Pre-Cooling and Thermal Coasting
HVAC is typically the largest single load in a California commercial building, often representing 40 to 60 percent of total electricity consumption. Pre-cooling the building before the peak period begins and then allowing the temperature to coast upward during peak hours is the single most effective TOU optimization strategy for most buildings. A well-insulated building can coast for two to three hours with only a one- to two-degree temperature rise that occupants barely notice.
The implementation involves programming your building management system to lower the cooling setpoint by two to four degrees starting at 1 PM or 2 PM, effectively storing thermal energy in the building mass. At 4 PM, when peak pricing begins, the setpoint increases to 76 or 77 degrees Fahrenheit, and the HVAC system runs at minimal load while the building slowly warms. By 7 PM, occupancy has typically dropped enough that the remaining peak hours see reduced cooling demand regardless.
Lighting and Plug Load Scheduling
While lighting is a smaller load than HVAC, scheduling common-area lighting and parking garage lighting to reduce during peak hours can contribute to overall savings. Daylighting strategies that reduce artificial lighting during late afternoon hours align perfectly with TOU peak periods. Plug load policies, such as scheduling EV chargers to pause during peak hours and resume at 9 PM, can also contribute meaningfully in buildings with growing EV infrastructure.
Battery Energy Storage
Behind-the-meter battery storage is increasingly cost-effective for California commercial buildings specifically because of TOU rate differentials. A battery system charges during off-peak hours at 31 cents per kWh and discharges during peak hours, avoiding 50-cent electricity. The 19-cent spread, applied over five hours of peak per day for roughly 120 peak days per year, creates a revenue stream that can justify the capital investment within five to seven years, faster when combined with demand charge reduction and SGIP incentives.
Measuring and Tracking TOU Savings
Implementing load-shifting strategies without measurement is guessing. You need to establish a baseline, track your consumption by TOU period, and calculate the actual dollar savings generated by each strategy. The key metrics to monitor are your peak-to-off-peak consumption ratio, your peak demand in kW during on-peak hours, and your effective blended rate per kWh.
Most California IOUs provide interval data through their online portals. PG&E's Share My Data platform, SCE's Energy Manager, and SDG&E's My Account all offer 15-minute interval data that shows exactly when your building is consuming power. Download this data monthly and compare it against your TOU schedule to see how much consumption falls in each period.
For a portfolio of buildings, centralized tracking becomes essential. You need to see the TOU performance of every building in a single view, identify which buildings have the highest peak-period consumption, and prioritize optimization efforts accordingly. A building that consumes 60 percent of its electricity during peak hours represents a much larger savings opportunity than one that already runs at 30 percent peak consumption.
Choosing the Right Rate Schedule
California IOUs offer multiple TOU schedules, and the default schedule assigned to your building is not always the cheapest option. Each utility allows commercial customers to request a rate analysis to compare their current schedule against alternatives. PG&E, for example, offers B-19 and B-20 schedules with different demand charge and energy charge structures that may be more favorable depending on your building's load profile.
The optimal schedule depends on your building's ratio of energy consumption to peak demand, known as the load factor. Buildings with high load factors (steady consumption throughout the day) tend to benefit from schedules with lower energy charges and higher demand charges. Buildings with low load factors (spiky demand with lower average consumption) do better on schedules that minimize demand charges even if energy rates are slightly higher.
Request a rate comparison analysis from your utility at least once per year. Load profiles change as buildings add EV chargers, install solar, upgrade HVAC systems, or change occupancy patterns. A schedule that was optimal two years ago may no longer be the best fit. The analysis is free, and the savings from switching to a more favorable schedule can be immediate, often saving 3 to 8 percent on total electricity costs with no operational changes required.
Portfolio-Level TOU Optimization
Managing TOU optimization across a portfolio of California buildings requires a systematic approach. Each building has a different rate schedule, different load profile, and different optimization potential. The most effective portfolio managers rank their buildings by peak-period spending and focus optimization efforts on the highest-impact sites first.
Start by pulling 12 months of interval data for every building and calculating the percentage of total consumption that falls during peak hours. Buildings above 40 percent peak consumption are your immediate targets. Next, identify which loads in those buildings are shiftable. HVAC pre-cooling is almost always the first lever to pull because it requires no capital investment, only a BMS programming change.
For buildings where operational changes alone are insufficient, evaluate battery storage, solar-plus-storage, and demand response enrollment as complementary strategies. California's Self-Generation Incentive Program still offers meaningful rebates for battery installations at commercial properties, and the combination of TOU arbitrage, demand charge reduction, and demand response revenue can make the economics compelling even for buildings with shorter remaining lease terms.
A 200,000 square foot office building in PG&E territory that shifts just 15 percent of its peak consumption to off-peak hours can save $18,000 to $25,000 per year in energy charges alone, before accounting for demand charge reductions.