What is 4CP and how can Texas businesses reduce 4CP charges?

The short answer: 4CP charges are a transmission‑cost allocation that reflects a site’s contribution to the four most demanding 15‑minute intervals on the ERCOT grid each summer. Reducing those charges means lowering your share of the peak demand during those specific intervals, either by shifting load, curtailing non‑essential processes, or leveraging predictive analytics to stay out of the peak bucket.

For most Texas commercial and industrial (C&I) customers, the bulk of the 4CP bill is driven by a handful of minutes when the grid is at its tightest. If you can shave a few kilowatts during those windows, you can cut your transmission allocation by up to 27%—the same range we regularly achieve for our 8,000+ business customers, delivering an average $3.2 M in annual savings across the portfolio.

How ERCOT Defines the Four Summer Peaks

ERCOT’s market operates on a 15‑minute interval basis. During the June‑September summer window, the system operator identifies the four intervals with the highest system‑wide load. These are the “four coincident peaks” (4CP). The methodology is transparent:

1. Collect all 15‑minute LMP (Locational Marginal Price) data for the summer months.
2. Rank intervals by total megawatt demand across the ERCOT footprint.
3. Select the top four intervals—they may occur on different days, often during late afternoon on the hottest days.
4. Allocate each customer’s share based on the proportion of their demand that coincides with each of those intervals.

The resulting allocation is expressed in $/MWh and appears on the next year’s transmission invoice from the TDSP (Oncor, CenterPoint, AEP Texas, or TNMP). Because the charge is coincident, a site that peaks at the same time as the system does pays a larger slice of the transmission cost pool.

Why 4CP Matters for Your Bottom Line

Transmission charges are the second‑largest component of a Texas electricity bill after the energy charge. In 2023, the average 4CP allocation for a 5 MW C&I load was roughly $0.12/kWh, translating to an extra $6,000‑$8,000 per year for many midsize manufacturers. When you combine that with TDSP delivery‑charge structures (often a flat $/kW plus a usage component), the incremental cost can erode profitability, especially for margin‑tight operations.

Predictive Services: Knowing the Peaks Before They Hit

UPG’s Free Energy Health Check includes a 4CP audit that maps your historic demand against ERCOT’s published peak intervals. We then overlay:

• Weather‑adjusted load forecasts (using NOAA temperature ensembles).
• Load‑factor analysis to identify low‑efficiency periods.
• Ancillary‑service participation data to see if you are inadvertently increasing system stress.

The output is a set of “peak‑risk windows” – specific dates and times where a 5 % load reduction would move you out of the 4CP bucket. Our clients typically see a 10‑15 % reduction in peak demand during those windows after implementing the recommended measures.

Operational Strategies to Trim 4CP

1. Load Shifting with On‑Site Storage

Battery Energy Storage Systems (BESS) can discharge during the identified 4CP intervals, offsetting grid draw. A 500 kWh battery, sized to cover a 2‑MW short‑term surge, can shave up to 1 MW of demand for the critical 15‑minute window, reducing your 4CP share by roughly 20 %.

2. Process Rescheduling

Many manufacturers run batch processes that are flexible within a 4‑hour window. By moving those batches to early morning or late evening, you avoid the summer afternoon peaks. Simple scheduling software integrated with our demand‑forecast engine can automate the shift.

3. Demand‑Response (DR) Enrollments

ERCOT’s DR market allows participants to curtail load in exchange for a market payment. While the payment offsets the cost of curtailment, the primary benefit for 4CP is the reduction in your transmission allocation. UPG can negotiate block contracts that lock in a $/kW DR credit, complementing fixed‑rate power purchases.

4. HVAC and Lighting Controls

HVAC systems often account for 30‑40 % of a facility’s summer load. Installing smart thermostats that pre‑cool during off‑peak hours and dimming non‑critical lighting during the 4CP windows can shave 200‑500 kW with minimal impact on comfort or safety.

5. Power Factor Correction

While 4CP is a demand‑based charge, a low power factor can inflate the apparent kW reading used for allocation. Installing capacitor banks to keep PF above 0.95 can reduce the measured demand by up to 5 %.

When Chasing 4CP Isn’t Worth It

Not every site benefits from aggressive 4CP mitigation. Consider the following thresholds:

• Low peak‑to‑average ratio – If your load factor is above 0.85, you are already a flat‑load customer and the marginal gain from shaving a few kilowatts is minimal.
• Critical process constraints – Facilities that cannot interrupt processes (e.g., continuous chemical reactors) may incur higher operational risk than the dollar savings.
• Capital constraints – Deploying a BESS or extensive retrofits requires upfront CAPEX. If the payback exceeds 5‑7 years, the project may not meet a typical Texas C&I ROI target.

In those cases, a better approach may be to lock in a fixed‑rate power contract with a block structure that smooths exposure to LMP volatility, while accepting the baseline 4CP charge.

The Role of Fixed‑Rate and Block & Index Contracts

UPG’s portfolio includes both fixed‑rate and block‑plus‑index contracts. A fixed‑rate contract removes exposure to wholesale price spikes, which can be especially volatile during 4CP intervals when LMPs exceed $200/MWh. A block contract caps a portion of your consumption at a predetermined price, while the remainder is settled at index. By combining these structures, you can hedge against both energy and transmission cost volatility, preserving the savings you achieve from 4CP reduction.

Regulatory Context: Senate Bill 7 and the Electricity Facts Label

Texas Senate Bill 7 (2021) solidified retail choice, allowing C&I customers to select REPs that offer transparent pricing and demand‑side services. The Electricity Facts Label, mandated by the PUCT, now requires REPs to disclose 4CP exposure as a separate line item, giving you the data needed to benchmark against peers.

Bottom line

4CP charges are a predictable, albeit sizable, component of Texas transmission costs. By identifying the four summer peak intervals, leveraging predictive analytics, and applying targeted load‑shaping tactics—whether through storage, process rescheduling, or demand‑response—you can reduce your allocation by up to 27 %. For sites where the operational burden outweighs the savings, a strategic mix of fixed‑rate power contracts and a realistic 4CP target is the prudent path. UPG’s 25‑year Texas market expertise, free Energy Health Check, and access to a 30‑plus supplier panel make it straightforward to quantify the opportunity and execute a plan that protects your bottom line.