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

Thesis

Four‑coincident‑peak (4CP) transmission charges are the single largest demand‑related cost for many Texas C&I customers. They are calculated from a site’s share of the four highest‑load 15‑minute intervals on the ERCOT grid during the June‑September summer window. Reducing those charges requires precise load shaping, reliable forecasting, and a clear cost‑benefit analysis. In many cases, a targeted demand‑response program can shave 5‑15% off the 4CP component, which translates to a 2‑5% reduction in total electricity spend for a typical Texas manufacturer.

How ERCOT Defines 4CP

The four summer peaks

ERCOT identifies the four 15‑minute intervals with the highest system‑wide load between June 1 and September 30. These intervals are known as the "four coincident peaks" because they represent the moments when the grid is most stressed and transmission costs are highest. The intervals are published in the ERCOT Transmission Planning Report each March and are used to set the 4CP factor for the upcoming year.

Allocation to individual customers

Each commercial or industrial (C&I) customer’s 4CP charge is proportional to its share of the total load during those four intervals. The formula is:

4CP Charge = (Customer kW in 4CP interval ÷ Total ERCOT kW in that interval) × 4CP Transmission Rate

The transmission rate is set by the Public Utility Commission of Texas (PUCT) and reflects the cost of operating the high‑voltage network during the peak periods. For most customers, the 4CP component represents 20‑30% of the total transmission and distribution (T&D) bill.

Predicting the 4CP Intervals

Accurate prediction is essential because the 4CP factor is locked in once the ERCOT report is released. UPG’s Energy Health Check includes a 4CP audit that compares a client’s historical load profile against the published ERCOT peaks. Advanced analytics services can forecast the likelihood of a site being in the top‑10 % of load during any given 15‑minute window, using:

• Weather‑adjusted load models (temperature, humidity, solar irradiance)
• Production schedules for on‑site generation
• Historical demand‑response event performance

Clients that adopt a predictive approach typically see a 5‑10% reduction in their 4CP exposure before the next rate cycle.

Operational Strategies to Reduce 4CP

1. Load Shifting

Moving discretionary processes (e.g., batch heating, cooling tower operation, or packaging line runs) out of the identified peak windows can lower the site’s kW contribution. Even a 10‑minute shift can move a load out of a 4CP interval because the calculation is based on the exact 15‑minute slice.

2. Demand‑Response Enrollments

Participating in ERCOT’s ancillary services market (e.g., Regulation Service or Capacity) provides financial incentives for reducing load during high‑price periods. A well‑designed DR program can automatically curtail non‑essential loads when the system frequency drops below a preset threshold, which often coincides with the 4CP windows.

3. On‑Site Generation and Storage

Deploying a modest solar‑plus‑battery system can offset peak demand. For example, a 2 MW/4 MWh battery that discharges during the four peak intervals can shave up to 2 MW of load per interval, reducing the 4CP share by roughly 10‑15% for a 15 MW facility.

4. Power Factor Improvement

While 4CP is based on kW, poor power factor can increase overall T&D charges and indirectly affect the site’s ability to stay below the 4CP threshold. Installing capacitor banks to maintain a power factor above 0.95 can reduce overall demand charges and free capacity for load‑shifting.

When Chasing 4CP Isn’t Worth It

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

• Low peak load relative to system peak – If a site’s maximum kW is less than 5% of the ERCOT peak, the 4CP share is already minimal and further reductions yield diminishing returns.
• High operational rigidity – Facilities with continuous processes (e.g., petrochemical plants) may incur significant production loss or quality issues when shifting load.
• Cost of technology – The capital expense of a battery system must be weighed against the expected 4CP savings. At a 5% discount rate, a 2 MW battery typically needs to generate $150 k‑$200 k in annual 4CP savings to break even over a 10‑year life.

In these cases, UPG recommends focusing on broader demand‑charge optimization (e.g., fixed‑rate contracts, block structures) rather than a narrow 4CP chase.

The Role of UPG in 4CP Management

United Power Group brings 25+ years of Texas market expertise and a panel of 30+ top‑tier transmission‑savvy suppliers. Our free Energy Health Check reviews your most recent bill, audits TDSP delivery charges, and pinpoints 4CP exposure. For clients who act on our recommendations, the average spend reduction is up to 27%, equating to $3.2 M saved across our portfolio each year.

Bottom line

4CP charges are a predictable, high‑impact cost driver for Texas C&I customers. By understanding how the four summer peaks are selected, using accurate forecasting, and applying targeted load‑shifting, demand‑response, or on‑site resources, firms can reduce their 4CP share and improve overall electricity spend. However, the effort must be justified against operational constraints and capital costs. A disciplined, data‑driven approach—backed by UPG’s free Energy Health Check—lets businesses decide whether the potential savings outweigh the complexity.