Demand

What is 4CP and how Texas businesses can reduce their transmission charges

ERCOT’s Four Coincident Peak (4CP) transmission charges hit Texas businesses hard—often 10-30% of their total energy bill—by locking in costs based on the four hottest 15-minute intervals between June and September. Since these charges apply to the *next* year’s bill, cutting demand during those peaks (or avoiding them entirely) can slash costs by 10-25%. But not every site benefits from curtailment; we’ll show you how to decide if it’s worth the effort.

By UPG Market Desk — Texas Commercial Energy Consultants•Published July 17, 2026•8 min read

4CP is a hidden tax on Texas peak demand—and it’s getting worse every year

ERCOT’s Four Coincident Peak (4CP) transmission charges are the single biggest avoidable cost for Texas commercial and industrial (C&I) customers, often accounting for 10-30% of their annual electricity bill. Unlike retail rates or fuel costs, 4CP isn’t tied to usage—it’s a fixed penalty for being on the grid during the four hottest 15-minute intervals in ERCOT’s summer peak season (June–September). And here’s the kicker: the peaks that determine next year’s 4CP charges happen this summer, but the bill lands in November 2025—meaning your 2024 demand decisions lock in 2025’s costs. For a 1,000 kW site, a 5% reduction in peak demand could cut 4CP charges by $10,000–$30,000 annually. But not every facility can (or should) chase these savings—we’ll break down when it’s worth the effort and how to do it right.

How 4CP works: The four peaks that cost you

ERCOT identifies the four highest 15-minute demand intervals across the grid between June 1 and September 30. These aren’t your site’s peaks—they’re the system-wide peaks, when the grid is under the most stress. Your facility’s share of those peaks (expressed as a percentage of total ERCOT demand) determines your 4CP charge for the following year.

2024’s 4CP peaks: ERCOT’s 2023 data shows the four peaks occurred on August 14 (6:45 PM), August 13 (7:00 PM), July 19 (6:45 PM), and July 18 (7:00 PM)—all in the 6:30–7:15 PM window, when residential AC loads spike. (ERCOT publishes the exact dates here.)
Your site’s exposure: If your facility ramps up demand during those intervals, your TDSP (transmission provider) assigns you a 4CP factor—a percentage of your total demand that’s deemed “coincident” with the system peaks. For example, if your site hits 800 kW during a 4CP interval but ERCOT’s total demand is 80,000 MW, your 4CP factor might be 0.001% of system demand. Multiply that by ERCOT’s 4CP charge ($/kW) and your TDSP’s allocation method, and you get your bill.
The math that hurts: In 2024, ERCOT’s base 4CP charge was ~$5.20/kW (varies by TDSP). A 1,000 kW site with a 0.002% 4CP factor would pay $10,400 just for transmission—before fuel or retail costs. Reduce your peak demand by 10% during those intervals, and that charge drops to $9,360. For larger industrial sites (5,000+ kW), the savings scale linearly.

Why 4CP is getting more expensive—and why you can’t ignore it

ERCOT’s transmission grid is aging, and costs are shifting to customers. The 2022 winter storm and rising renewable penetration (which requires more grid infrastructure) have forced ERCOT to recoup $1.5 billion+ annually in transmission upgrades. 4CP is the primary tool to do that—it’s not a subsidy; it’s a cost shift.
The PUCT is making 4CP stickier. In 2023, the Public Utility Commission of Texas (PUCT) rejected proposals to cap or reform 4CP, citing the need for grid reliability. Expect 4CP charges to rise 3–5% annually as ERCOT’s capital costs grow.
Your TDSP’s allocation method matters. Oncor, CenterPoint, and AEP Texas use different formulas to assign 4CP factors. For example:
- Oncor uses a “load diversity” model, penalizing sites that spike demand during system peaks.
- CenterPoint applies a flat percentage of your peak demand, regardless of timing.
- AEP Texas uses a weighted average of your top 10 peaks.
Ask your TDSP for your 4CP factor calculation—it’s the only way to know if you’re overpaying.

How to cut your 4CP charges: Curtailment, prediction, and strategy

Option 1: Demand curtailment during the 4CP intervals

The most direct way to reduce 4CP is to lower your demand during the four system peaks. Here’s how:

Identify your site’s peak periods. Use your interval data (15-minute reads) to see when you hit demand spikes. If your peaks align with ERCOT’s 4CP windows (typically 6:00–8:00 PM in summer), you’re exposed.
Load shedding or demand response. Shut down non-critical loads (HVAC, lighting, production lines) for 15–30 minutes during those intervals. For example:
- HVAC: Raise thermostats by 5°F for 30 minutes (can cut demand by 20–40%).
- Production: Pause non-essential equipment (conveyor belts, compressors).
- Lighting: Switch to LED or dim non-critical areas.
Automated demand response. Programs like ERCOT’s DR program or your REP’s demand response offering can pay you to curtail (sometimes $5–$15/kW for participation). Even if you don’t get paid, the 4CP savings often outweigh the lost production costs.
Battery storage. If you have behind-the-meter batteries, discharge them during 4CP intervals to offset demand. A 500 kWh battery can shave 100–200 kW from your peak, cutting 4CP by $2,000–$5,000/year.

Option 2: Shift your demand outside the 4CP windows

If you can’t curtail, avoid peaking during the 4CP intervals by:

Pre-cooling/pre-heating. Charge thermal mass (ice storage, water tanks) before the peaks to reduce HVAC loads during critical intervals.
Time-of-use (TOU) rate alignment. If your REP offers TOU rates, structure your usage to avoid high-demand blocks. For example, run heavy loads before 6:00 PM or after 8:00 PM when 4CP exposure is lower.
Shift production schedules. If you control operations, move non-urgent manufacturing to overnight or early morning when ERCOT demand is lower.

Option 3: Predict and optimize with data

You can’t reduce what you don’t measure. Here’s how to get ahead:

Get your interval data. Your TDSP provides 15-minute interval reads—critical for spotting 4CP exposure. If you don’t have it, request it via your REP.
Use ERCOT’s 4CP forecast. ERCOT publishes predicted peak dates in April (for summer). Bookmark this page and plan curtailment 3–6 months ahead.
Run a 4CP audit. UPG’s free Energy Health Check includes a 4CP exposure analysis, comparing your site’s peaks to ERCOT’s historical 4CP intervals. We’ve found customers overpaying by 15–25% due to poor load alignment.
Model the cost of curtailment. Use a simple spreadsheet to compare:
- Cost of lost production (e.g., $20/kW-hour for downtime).
- Savings from 4CP reduction (e.g., $15/kW saved in transmission charges).
If the savings exceed the cost, curtailment pays. If not, focus on long-term demand optimization.

When chasing 4CP isn’t worth it

Not every site should jump through hoops to shave 15 minutes off demand. Here’s when it’s not worth the effort:

Your 4CP factor is already low. If your site’s demand is <500 kW and your TDSP’s allocation method is lenient (e.g., CenterPoint’s flat percentage), you might save <5% on transmission costs. The operational hassle won’t justify it.
Your load factor is already high. If your facility runs 24/7 (e.g., data centers, chemical plants), curtailment means lost revenue or production delays. In these cases, negotiate a fixed transmission charge with your TDSP or REP.
Your TDSP doesn’t penalize you. Some TDSPs (like TNMP in rural areas) use simplified 4CP allocation that doesn’t reward curtailment. Check your bill to see if your 4CP charge is proportional to system peaks—if not, you may not benefit from changes.
The savings are dwarfed by other costs. If your retail electricity rate is 8–10 cents/kWh (fixed or indexed), and your demand charges are higher than 4CP, focus on reducing demand charges first. A 10% demand reduction might save $50,000 in demand fees but only $10,000 in 4CP—prioritize accordingly.

The bigger picture: 4CP and your energy strategy

4CP isn’t just a one-year problem—it’s a structural cost that will keep rising. Here’s how to think about it long-term:

Lock in fixed transmission charges. Some REPs offer fixed-rate contracts that cap 4CP exposure, trading volatility for predictability. UPG’s block & index contracts can include 4CP hedging as part of the deal.
Combine with other strategies. If you’re already doing demand response for DR programs, align it with 4CP intervals. If you’re adding solar, size the system to offset evening peaks (when 4CP hits hardest).
Push back on TDSP allocation. If your TDSP’s 4CP method seems unfair (e.g., penalizing you for a peak you couldn’t control), file a complaint with the PUCT. In 2023, UPG helped a client reduce their 4CP factor by 30% after challenging Oncor’s load diversity model.

Bottom line

ERCOT’s 4CP charges are a tax on peak demand, and they’re not going away. For Texas businesses with 500 kW+ loads, reducing exposure during the four summer peaks can save $10,000–$100,000 annually—but only if you measure, predict, and act before the peaks hit. Start with a 4CP audit to see if you’re overpaying, then decide whether curtailment, load shifting, or contract structuring makes sense for your site. If you’re unsure where to start, UPG’s free Energy Health Check will show you exactly how much you’re paying—and how to cut it.