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

The core truth about 4CP

Four Coincident Peak (4CP) charges are not a mysterious tax; they are a direct pass‑through of ERCOT’s transmission cost for the four most demanding 15‑minute intervals in the June‑September summer window. For a Texas C&I customer, those four intervals determine the bulk of the annual transmission component on the bill. If a facility can shift load out of those intervals, its 4CP allocation drops, and the bottom line improves.

The answer is simple: identify the intervals, predict when they will occur, and apply demand‑side actions only when the expected reduction exceeds the cost of curtailing operations. UPG’s free Energy Health Check can pinpoint your current 4CP exposure and map a realistic savings path.

How ERCOT defines the four coincident peaks

The summer window and 15‑minute intervals

ERCOT runs a nodal market where every generator and load reports a 15‑minute LMP (Locational Marginal Price). From June 1 to September 30, ERCOT scans all intervals and flags the four with the highest simultaneous demand across the grid. Those are the "coincident peaks." The selection is purely statistical—no weighting for weather or market price—so any customer that contributes load during those moments shares the transmission cost proportionally.

Allocation methodology

Transmission charges are allocated on a "peak‑share" basis. For each of the four intervals, ERCOT calculates the total system demand (in MW) and each customer’s contribution (in MW). The ratio of a customer’s MW to the system total for that interval becomes its share of the transmission cost for that interval. The four interval shares are summed, then multiplied by the annual transmission cost pool, which is funded by the PUCT‑approved tariff. The result appears on the bill as a separate 4CP line item, expressed in cents/kWh of energy usage.

Predicting the next year’s 4CP intervals

Historical patterns and weather drivers

While the exact timestamps shift yearly, the peaks consistently align with extreme heat days, high humidity, and low wind output. ERCOT publishes the previous year’s 4CP timestamps within weeks of the summer close, giving customers a baseline. Weather forecasts from the National Weather Service (NWS) and the EIA’s Residential Energy Consumption Survey (RECS) can be over‑laid to forecast likely peak days.

UPG’s predictive service

UPG leverages a proprietary algorithm that ingests:

• Historical 4CP timestamps (last 5 years)
• Hour‑by‑hour temperature, humidity, and wind data from NOAA
• Load profiles of similar‑size facilities in the same ERCOT zone
• Real‑time market signals such as LMP spikes The model produces a probability heat map for each 15‑minute interval in the upcoming summer. Facilities with a probability >70 % are flagged for pre‑emptive demand‑shift planning.

Operational strategies to shave 4CP exposure

Load shifting and scheduling

If a process can be moved to off‑peak hours (e.g., night‑time cooling tower cycles, batch production, or HVAC pre‑cooling), the facility reduces its MW contribution during the high‑probability windows. Simple scheduling changes often require no capital outlay and can cut 4CP exposure by 5‑10 %.

Automated demand response (ADR)

For larger loads, an ADR system can automatically shed or throttle non‑critical loads when a real‑time 4CP alert fires. Typical ADR actions include:

• Reducing compressor set‑points by 2‑3 °F
• Temporarily dimming non‑essential lighting
• Deferring non‑critical water heating When calibrated correctly, ADR can lower a site’s peak MW by 0.5‑1.5 MW per interval, translating to a 2‑4 % reduction in the annual 4CP charge.

Strategic curtailment vs. operational pain

Curtailment is not free. Lost production, quality deviations, and labor overtime can erode any transmission savings. UPG recommends a cost‑benefit threshold: if the projected 4CP reduction saves less than $0.05 per kWh of curtailed output, the effort is likely not worthwhile. For a 1 MW process running 2 hours during a peak, the transmission saving is roughly 0.5 cents/kWh; if the process value is $0.08/kWh, curtailment would be a net loss.

Energy storage as a buffer

Battery storage can discharge during predicted 4CP intervals, offsetting demand without touching the production line. At a typical cost of $150/kWh for a 2‑hour system, the breakeven point is about a 10 % reduction in the 4CP line for a 5 MW facility. UPG can model the storage size needed to hit that breakeven based on your specific load profile.

When chasing 4CP isn’t worth it

Low‑impact facilities

Facilities whose peak demand never exceeds 2 MW usually see a marginal 4CP line—often under $5,000 annually. The administrative overhead of monitoring, forecasting, and curtailing can exceed the savings.

High‑value production processes

If a plant’s core product margin is thin, any production loss during a 4CP event directly hits profitability. In such cases, UPG advises focusing on long‑term solutions—like upgrading to higher‑efficiency motors or retrofitting variable‑speed drives—rather than short‑term curtailment.

Contractual constraints

Some REPs embed fixed‑rate contracts that already include a pass‑through of transmission costs. If the contract’s price floor is above the projected 4CP savings, the net benefit disappears. A quick Energy Health Check can reveal whether a contract restructure would be more effective than demand‑side actions.

How United Power Group helps you manage 4CP

Free Energy Health Check

UPG’s Energy Health Check reviews your most recent bill, audits TDSP delivery‑charge allocations, and extracts the 4CP component. Within five business days we deliver a clear picture of your exposure and a prioritized action list.

25+ years of Texas market expertise

Our team has helped over 8,000 Texas businesses save an average of $3.2 M annually. By leveraging a 30‑plus top‑tier supplier panel, we can lock in fixed‑rate contracts that isolate you from volatile transmission spikes while still allowing targeted 4CP mitigation.

Ongoing monitoring and reporting

Once a mitigation plan is in place, UPG provides monthly dashboards that compare actual 4CP usage against the forecast. If a deviation occurs, we trigger an ADR alert and advise on real‑time adjustments.

Bottom line

4CP charges reflect a customer’s share of the four highest‑demand 15‑minute intervals each summer. By using predictive analytics, modest load‑shifting, and, when justified, automated demand response or storage, Texas businesses can lower those charges—provided the savings exceed the operational cost. UPG’s free Energy Health Check and decades of ERCOT experience give you the data and expertise to decide whether a 4CP strategy makes financial sense.