Rates, Time-of-Use

Prices for services that vary with the time of day or night a customer uses it. These rates reflect the different costs a company incurs in providing service during peak and off-peak periods. Whether a particular customer benefits from time-of-use rates depends on the percentage of total consumption used during peak periods. Nevertheless, if metering costs are low, such rates are much more efficient than uniform (unvarying) prices, since the latter do not signal the true opportunity cost of serving peak and off-peak demands.