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

Four‑coincident‑peak (4CP) transmission charges are a controllable, high‑impact component of a Texas commercial or industrial electricity bill, and they can be reduced with data‑driven load management. In practice, 4CP can represent 5‑15% of total electricity spend, depending on the load profile, so even modest reductions translate into meaningful savings.

The short answer: ERCOT identifies the four highest‑demand 15‑minute intervals that occur during the June‑September summer window, then allocates each customer a share of the associated transmission cost based on the proportion of its load during those intervals. By shifting or curtailing load during those specific windows, a business can lower its 4CP allocation and, consequently, its overall transmission bill.

How ERCOT Determines the Four Coincident Peaks

Summer window and 15‑minute intervals

ERCOT’s 4CP methodology applies to the summer peak period defined as June 1 through September 30. The grid operator records system‑wide demand every 15 minutes and ranks each interval by total megawatt load. The four highest‑load intervals—known as the coincident peaks—are frozen after the season ends and become the benchmark for the next year’s transmission cost allocation.

Calculating a customer’s share

For each of the four peak intervals, ERCOT measures the kilowatt (kW) contribution of every participating load point (typically a sub‑meter at the customer’s premises). The customer’s share of the 4CP charge equals the sum of its kW in the four intervals divided by the sum of all kW in those intervals, multiplied by the total transmission cost allocated to the 4CP bucket. The cost bucket is funded by the Public Utility Commission of Texas (PUCT) and appears on the bill as a separate line item under the TDSP’s delivery‑charge section.

Why 4CP Matters to Your Bottom Line

Transmission charges are the second‑largest component of a typical Texas C&I electricity bill after the energy charge (cents/kWh). While the base transmission rate is largely fixed, the 4CP surcharge fluctuates with system stress and can rise sharply in years of extreme heat. For a facility that peaks at 1 MW during the summer, a 10% reduction in 4CP share can shave roughly $30,000‑$45,000 off an annual bill, assuming an average 4CP rate of $12/MWh. Across UPG’s 8,000+ business customers, collective 4CP savings contribute to the $3.2 M we save clients each year.

Strategies to Reduce 4CP Exposure

Predictive load modeling

Accurate forecasting is the foundation of any 4CP reduction program. UPG’s proprietary load‑prediction service ingests historical consumption, weather forecasts, and production schedules to flag the likelihood of a site hitting a 4CP interval. By identifying high‑risk windows 48‑72 hours in advance, operations leaders can plan short‑term adjustments without disrupting core processes.

Demand response and curtailment

When a predicted 4CP interval approaches, the quickest lever is to curtail non‑essential load. Common tactics include:

• Staging HVAC set‑points 2‑4 °F higher for a 15‑minute window.
• Delaying non‑critical batch processes or refrigeration cycles.
• Deploying on‑site storage to discharge during the peak interval, effectively reducing net demand. These actions are typically cost‑neutral because the avoided 4CP charge outweighs the marginal loss in productivity or the small efficiency penalty of a brief temperature shift.

Contractual hedging (fixed‑rate, block & index)

While 4CP is a transmission cost, the way a business structures its energy contract can influence exposure. Fixed‑rate contracts lock in the energy price but leave the transmission component variable, allowing the customer to reap the full benefit of any 4CP reduction. Block contracts that allocate a set number of megawatt‑hours at a predetermined price can also be paired with a demand‑response program to keep actual consumption below the block threshold during peak intervals, avoiding both energy and 4CP penalties.

Operational considerations – when it isn’t worth it

Not every facility can justify the operational effort required to chase 4CP savings. If a site’s load profile is flat and never approaches the system‑wide peak, its 4CP share may already be negligible. Likewise, processes that cannot tolerate even a 15‑minute interruption—such as continuous casting or critical data‑center workloads—may incur higher indirect costs than the 4CP reduction itself. In those cases, UPG recommends focusing on broader energy‑price optimization rather than a dedicated 4CP program.

Leveraging UPG’s Free Energy Health Check

UPG’s Energy Health Check includes a detailed review of your most recent electricity bill, a TDSP delivery‑charge audit, and a preliminary 4CP exposure analysis. With 25+ years of Texas market expertise and a panel of 30+ top‑tier suppliers, we can model the financial impact of targeted demand‑response actions and recommend the contract structure—fixed‑rate, block, or index—that maximizes your overall spend reduction, which can be as high as 27% for qualified customers.

Bottom line

4CP charges are a predictable, quantifiable slice of the transmission bill that can be trimmed through proactive forecasting, short‑duration load curtailment, and smart contract selection. The effort pays off for most Texas C&I customers with a pronounced summer peak, delivering savings that directly contribute to the $3.2 M UPG saves its clients each year. Start with a free Energy Health Check, let our analysts pinpoint your 4CP hotspots, and decide whether the operational trade‑off aligns with your business goals.