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

Thesis: 4CP charges are a performance‑based transmission cost that can add 5‑15% to a Texas C&I electricity bill, but they are controllable through precise load forecasting, targeted curtailment, and strategic procurement. By aligning operations with ERCOT’s four summer peak intervals, a business can lower its next‑year transmission allocation without sacrificing reliability.

The first two paragraphs answer the core question: 4CP is a set of four 15‑minute intervals in the ERCOT summer that determine each customer’s share of transmission congestion costs. Those intervals are identified after the season ends, and the resulting charge appears on the next year’s TDSP bill as a separate line item.

Understanding 4CP Charges

How ERCOT defines the four coincident peaks

ERCOT runs a nodal market where every generator and load is assigned a location on the transmission system. During the summer (June 1 – Sept 30), ERCOT records the Locational Marginal Price (LMP) every 15 minutes. At the end of the season, the system operator isolates the four 15‑minute intervals with the highest system‑wide LMPs—the so‑called four coincident peaks (4CP). These intervals are not fixed dates; they can fall on any day in the summer, often aligning with extreme heat waves or unexpected outages.

How the charges are calculated for each customer

Each TDSP (Oncor, CenterPoint, AEP Texas, TNMP) receives the 4CP intervals from ERCOT and allocates the associated transmission cost to its customers based on coincident demand—the amount of kW a customer was drawing during each of the four intervals. The formula, simplified, is:

4CP Charge = (Customer kW in 4CP interval ÷ Total kW in 4CP interval) × Total 4CP Transmission Cost

The total 4CP transmission cost is the sum of congestion, loss, and ancillary service charges that ERCOT attributes to those intervals. For a typical 500 kW industrial facility, a 10 % share of a $1.2 M 4CP pool translates to roughly $12 k in additional transmission expense.

Strategies to Reduce 4CP

Forecasting and demand response

Accurate short‑term forecasting is the foundation of any 4CP reduction program. UPG’s proprietary prediction service ingests historical load, weather forecasts, and ERCOT market signals to produce a 15‑minute ahead demand curve with a mean absolute error of less than 2 % for most Texas C&I customers. When the model flags an upcoming 4CP interval, the operations team can trigger pre‑approved demand‑response (DR) events.

Typical DR actions include:

• Reducing non‑essential HVAC set points by 2‑4 °F.
• Temporarily shedding non‑critical process loads (e.g., water treatment pumps) for 15‑30 minutes.
• Shifting flexible production to off‑peak hours using on‑site storage or backup generators.

Even a 5 % reduction in kW during a 4CP interval can cut a facility’s share of the charge by roughly $600‑$1,200 per year, depending on the overall pool size.

Load shifting and curtailment

Beyond real‑time DR, businesses can redesign their load profile to avoid coincident peaks altogether. Strategies include:

• Pre‑cooling the building early in the morning when LMPs are low, then allowing a modest temperature drift during the peak window.
• Staggering production schedules so that the highest‑kW processes do not overlap with the historical 4CP windows identified in the prior year’s data.
• Deploying on‑site generation (solar + storage) that can discharge during the identified 4CP intervals, effectively offsetting demand.

UPG’s engineering team can model the cost‑benefit of each option. For a 1 MW facility, installing a 500 kWh battery that discharges during 4CP intervals can yield a payback of 3‑5 years when the avoided 4CP charge is combined with the broader transmission savings.

Leveraging UPG’s Energy Health Check and procurement expertise

UPG offers a Free Energy Health Check that audits your most recent bill, validates TDSP delivery‑charge calculations, and pinpoints 4CP exposure. With 25+ years of Texas market expertise and a 30‑plus top‑tier supplier panel, we routinely achieve up to 27 % spend reduction for clients, translating to an average $3.2 M saved yearly across our 8,000+ business customers.

Our consultants can:

1. Validate that the TDSP’s 4CP allocation matches the ERCOT data.
2. Negotiate contract structures (fixed‑rate, block & index) that include a transmission‑cost pass‑through cap.
3. Implement automated DR triggers tied to ERCOT’s real‑time LMP feed, reducing manual intervention.
4. Report quarterly 4CP performance so senior leadership can see the ROI in plain dollars.

When 4CP Management May Not Pay Off

High baseline load factor

If a facility runs at a high load factor (e.g., >85 % of its peak capacity) and its demand curve is flat, the incremental benefit of shaving a few kilowatts during 4CP intervals diminishes. The cost of installing DR infrastructure or adding storage may exceed the avoided $10‑$15 k annual 4CP charge.

Operational constraints

Manufacturing lines that cannot be interrupted without costly re‑work, or data‑center operations that require continuous power, may find the operational risk outweighs the modest savings. In such cases, UPG recommends focusing on contractual hedges—selecting a fixed‑rate plan that includes a transmission cost cap—rather than pursuing aggressive curtailment.

Timing and predictive uncertainty

Because the 4CP intervals are only identified after the summer, there is inherent uncertainty. If a business relies on historical patterns that no longer hold (e.g., a new large customer joins the grid), the predicted 4CP windows may be off, leading to missed DR events. When predictive confidence falls below 70 %, the effort to chase 4CP can become a net loss.

Bottom line

4CP charges are a real, measurable cost component for Texas C&I customers, but they are not immutable. By combining accurate 15‑minute forecasting, targeted demand‑response, and strategic procurement—services that UPG delivers through its free Energy Health Check and deep market expertise—most businesses can trim 4CP expense by 5‑15 %, often translating to six‑figure savings. However, firms with flat load profiles, critical continuous processes, or low predictive confidence should weigh the operational burden against the potential dollar gain and may be better served by a transmission‑capped contract rather than an aggressive 4CP reduction program.