What LIPA's new time-of-use electric rates may mean for you

In less than a year, PSEG Long Island will begin enrolling electric customers in a new LIPA rate plan that offers discounts for shifting usage to off-peak times, while hiking energy costs during a four-hour weekday peak.

While there’s plenty of time to decide whether you want to stick with the new rate, it’s a good time to review the plan to see if you can save money or if it could increase the amount you pay for electricity.

Most customers will save money just by allowing the automatic switch and keeping their habits about the same — somewhere about $3 less a month, according to the Long Island Power Authority. Some could save even more. But big peak users could see increases. 

Here’s a list of questions to consider before opting for one of two time-of-day rates.

How will the time of day rates work?

Put simply, customers will get relatively lower rates for all but the four peak hours between 3 p.m. and 7 p.m. each weekday. The peak rate, based on 2023 figures, would be 39 cents a kilowatt hour during the summer starting June 1 and ending Sept. 30. That rate drops to 37 cents in the non-summer period.

The off-peak rate, which also applies for all weekend hours and holidays, is 20 cents during the summer and 18 cents during the non-summer months.

How can I save under the new plan?

Shifting more of your usage to off-peak will save you, and LIPA, money. LIPA is also offering a separate super off-peak rate that provides greater discounts to those who can shift some usage to 10 p.m. to 6 a.m.-- a plan that could benefit electric vehicle owners who charge at night.  The more you shift to those lower-cost periods, the more you save.

Could my bill go higher?

Absolutely. Most people return from work during that peak time and for many the first action during a hot summer day is to turn on the air conditioner, then start cooking at the electric stove. LIPA says those customers can save by "pre-cooling" their homes, and then turning the AC off between 3 p.m. and 7 pm. But not everyone can. AC units and electric ranges are big users of electricity, and customers could see their bills increase if they concentrate lots of usage into that four-hour period, especially since cooking is largely a daily occurrence. The same applies to always-on high-usage appliances such as refrigerators and heaters.

LIPA says it has built assumptions about cooking and refrigerator usage into its model on the impact on rates, and the vast majority of customers will come out about $3.50 a month ahead under the new rates without changing their behavior. The utility is still working on how to address customers who currently heat their homes with electric heat, and could resolve it by year end.  

Can I get off the time-of-day rate?

Yes. Customers who don’t like the scheme or see unexpected increases can call PSEG to opt out for a new standard flat rate, which would charge 24 cents a kilowatt-hour in the summer and 21 cents a kilowatt-hour for all other months. Commercial customers won't be part of the 2024 rollout. Nor will customers who don't have smart meters. 

What if I have solar panels?

The new rate plan will apportion solar energy produced during peak and off-peak times into two different buckets, with peak and off-peak usage drawing separately from each bank. Some solar companies balked at the concept and as a result LIPA devised an "exchange" plan to allow customers to shift some off-peak energy into the peak bank, or vice versa if they come up short. Off-peak credits would be exchangeable to peak at a 2 for 1 exchange rate. 

How does the time-of-day rate save the utility money?

LIPA and other utilities are required to build the system to accommodate the highest projected peak usage periods, usually during the hottest summer days. If the utility can shift more customer usage to non-peak hours, it can save money not only on power purchases but also on future capacity needs. In the case of time-of-day rates, LIPA says it plans to save the equivalent of an entire power plant of capacity, amounting to $30 million to $60 million a year, and at least theoretically pass those savings onto customers.

What kind of savings can I expect if I go along with this plan?

Washing clothes off-peak can save $1.75 per month, LIPA says. If you turn off the AC and “pre-cool” your home before 3 p.m., you can save $12.75 per month. If you have an optimized battery storage unit in your home and charge it during the off-peak, expect to save $40 a month. And electric cars optimized for off-peak charging can save another $43.50. Those who opt for super off-peak can save even more, LIPA says.

What isn’t LIPA telling us?

The new rates are based on 2023 budget assumptions, and account only for the two largest components of bills: the power supply charge and the delivery charge. Other fees and charges such as taxes, renewables, storm costs and assessments -- some of which fluctuate year to year or month to month -- could drive bills higher, or lower. 

What happens if my bill soars?

LIPA is offering a one-year guarantee for customers on the plan. If your bill goes higher than it would have had it remained under a standard flat rate, it will refund the difference, promising even to send ratepayers a check, not just offer a credit. After the one-year period, you’re on your own. So watch your PSEG bill carefully, and switch back, or change your behavior, if costs go off the chart.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.