DTE Energy rolls out time-of-day rates -- What it means for electricity customers

New this month, DTE Energy customers will be charged a different rate depending on when they are using electricity.

Under time-of-day pricing, electricity will cost less during off-peak hours. This variable pricing is a shift from a set amount all day.

During the peak hours, 3-7 p.m., on weekdays in October through May, customers will be charged 16.75 cents per kWh. During this peak time from June through September, the rate will be 20.98 cents per kWh.

On weekends and non-peak hours, the cost will be 15.4 cents per kWh.

DTE says this new pricing will help balance the electric grid by encouraging customers to shift high-energy tasks, such as laundry, outside peak hours. Consumers Energy previously switched to a similar pricing model. 

When it introduced the new pricing, the electric company said it didn't believe bills would go up and noted that some customers are already on a time-of-day rate plan.

According to data from the Bureau of Labor Statistics, customers in the Detroit area paid an average of 18.9 cents per kWh for electricity in January 2023. For most of last year, the average was 18 to 18.9 cents per kWh. From January through March, that average was 17.9 cents. 

"The Michigan Public Service Commission has instructed all utilities to adopt, to move to this type of a rate structure," said Angie Pizzuti, with DTE. "And, we understand that customers won't be able to move all of their load out from 3 to 7, but there are discretionary things that they can move off-peak that will allow them to save money."

Customers will begin seeing the price change this month, depending on their billing cycle. 

The MPSC released a statement:

"Dating back several years, the MPSC has encouraged utilities to address the fact that the cost of producing or procuring electricity from the market varies by time of day and day of the week, as well as the time of year. In summertime, for one, it costs more to produce electricity on a hot weekday, when business is in full swing and residential and commercial customers are using air conditioning, than it does on a cool weekend when businesses are closed and air conditioning is less needed.The goal of time-based pricing is to align utility rates with the actual costs of producing it at different times, in a revenue-neutral way (the utilities will not make additional profit off these rates), with the aim of reducing overall peak demand. The time of use rates have been tested in pilot programs and have shown a reduction in peak demand during critical summer daytime peaks, and that saves customers money in the long term because utilities do not have to procure additional energy resources at their most expensive prices to produce. These rates encourage an overall shift to spread electricity use over a greater number of hours, flattening the peak.

"The MPSC worked with DTE Electric and Consumers Energy over the years to conduct pilot programs with customers to test how this would work and to prepare both the utilities and their customers for this change in approach to pricing. The pilot programs involved significant communication with participating customers on how the rates work, as well and messaging about how reducing air conditioning use and shifting use of energy-intensive appliances – dishwashers, clothes washers and dryers, and the like – to hours before or after the weekday peak times can lessen the impact of the higher peak rates. Some other Michigan utilities also offer voluntary time-based rates on the same principles, including – as one example – discounted electric vehicle charging rates at night.In addition, these rates help provide additional opportunities for customer to manager their energy bills. For customers who are more cost-conscious, shifting consumption to off peak times can help lower electricity bills, while those who prioritize convenience pay costs more aligned with the impact on the system."