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

The core truth about 4CP

Four‑coincident‑peak (4CP) transmission costs can represent 20‑30% of a commercial or industrial electric bill in Texas. The charges are based on a site’s usage during the four highest‑demand 15‑minute intervals across the June‑September summer window. Because those intervals are used to fund ERCOT’s 4CP transmission upgrades, any reduction in a site’s share directly lowers next‑year’s transmission bill. In short, 4CP is a cost‑allocation mechanism, not a tariff, and it can be managed with data, timing, and strategic procurement.

Answer: Texas businesses can reduce 4CP charges by (1) accurately forecasting when the four peak intervals will occur, (2) shifting or curtailing load during those intervals, (3) leveraging fixed‑rate or block contracts that smooth exposure, and (4) partnering with an experienced energy procurement firm to audit and optimize demand. The first two steps are operational; the latter two are contractual and advisory.

Understanding ERCOT’s 4CP methodology

How ERCOT identifies the four summer peaks

ERCOT publishes a 15‑minute LMP (locational marginal price) and demand data for each node. For each summer (June 1 through Sept 30), ERCOT scans the entire dataset and selects the four 15‑minute intervals with the highest system‑wide demand that also coincide across the three major load zones (North, South, West). These intervals are called the four coincident peaks because they occur simultaneously across the zones, stressing the transmission network.

The identified intervals are publicly posted after the summer ends and become the basis for the next year’s 4CP allocation. The PUCT requires that each TDSP (Oncor, CenterPoint, AEP Texas, TNMP) calculate a customer’s share of the 4CP cost based on the ratio of that customer’s demand during the four intervals to the total system demand for the same intervals.

How a site’s share translates into a bill

The 4CP charge is expressed in cents per kilowatt‑hour (c/kWh) and added to the transmission component of the retail rate. For a typical C&I customer, the 4CP factor ranges from 0.015 c/kWh to 0.035 c/kWh, depending on the node and the customer’s load profile. A 500 kW facility that peaks at 450 kW during the four intervals will see a 4CP charge roughly equal to:

(450 kW / total system demand during peak interval) × 4CP factor × total kWh consumed in the billing period

Because the denominator (total system demand) is large, even modest reductions in the numerator can shave thousands of dollars off a $30,000‑$50,000 annual transmission bill.

Operational tactics to lower 4CP exposure

Predictive analytics and demand shaping

Accurate prediction of the four peak intervals is the first lever. ERCOT’s historical data show that the peaks usually fall in late July and early August, but weather anomalies can shift them. Advanced forecasting services—often provided by third‑party analytics firms or by an energy‑consulting partner—use temperature, humidity, and load‑curve trends to produce a 30‑day “peak window” calendar.

With a calendar in hand, facilities can program HVAC, refrigeration, and process loads to run at reduced capacity during the identified windows. Simple actions such as raising thermostat set points by 2 °F, pre‑cooling warehouses, or delaying non‑critical batch runs can cut peak demand by 5‑15%.

Curtailment and load shifting

When a facility’s processes are flexible, short‑duration curtailment (5‑15 minutes) during a 4CP interval can be highly effective. The cost of a brief curtailment—often measured in lost production—must be weighed against the transmission savings. For example, a plant that saves $0.025 c/kWh on a 500 kW load for a 15‑minute interval avoids roughly $187 in 4CP charges (500 kW × 0.25 h × $0.025 c/kWh × 100). If the curtailment cost is lower, the net benefit is positive.

Load shifting to off‑peak periods (e.g., moving water‑heating or refrigeration cycles to early morning) also reduces the probability of being in the top‑four intervals. Energy management systems (EMS) that integrate with ERCOT’s real‑time data can automate these shifts.

When 4CP reduction is not worth the pain

Not every site should chase 4CP aggressively. Facilities with a flat load profile—such as data centers that run at near‑constant power—may find that the incremental effort to shave a few kilowatts during the peaks yields negligible savings. Likewise, if the 4CP factor for a node is at the low end of the range (≈0.015 c/kWh), the dollar impact of a 10 kW reduction may be under $50 per interval, which can be dwarfed by production losses.

A cost‑benefit analysis that includes labor, equipment wear, and potential downtime should be performed before implementing any curtailment program. In many cases, the smarter route is to lock in a fixed‑rate contract that caps exposure rather than to chase marginal operational gains.

Procurement and advisory solutions

Fixed‑rate and block contracts as a hedge

UPG’s 25 + years of Texas market expertise show that a well‑structured fixed‑rate or block contract can neutralize 4CP volatility. By purchasing a block of energy that covers the expected summer demand, a customer locks in a price that includes an estimated 4CP component. If the actual 4CP charge ends up higher, the contract price offsets the difference; if lower, the customer still benefits from price certainty.

Our panel of 30 + top‑tier suppliers offers contracts with built‑in 4CP hedges that have historically delivered up to 27% spend reduction for clients. The average client saves $3.2 M annually across the portfolio, and the savings are often amplified when 4CP is a large bill component.

Free Energy Health Check

A practical first step is UPG’s free Energy Health Check, which reviews the most recent bill, audits TDSP delivery‑charge allocations, and identifies 4CP exposure. The audit pinpoints whether a site’s 4CP share is above the regional average and recommends a mix of operational and contractual actions.

Ongoing monitoring and adjustment

Because ERCOT can revise the 4CP intervals after the summer, ongoing monitoring is essential. UPG’s demand‑management platform provides real‑time alerts when a site’s demand approaches the projected peak window, allowing operators to execute pre‑approved curtailments automatically. Quarterly reviews ensure that contract structures remain aligned with the evolving 4CP landscape.

Bottom line

4CP is a cost allocation that rewards facilities that can stay out of the four highest‑demand 15‑minute intervals each summer. Accurate forecasting, targeted load curtailment, and strategic fixed‑rate contracts are the three pillars of an effective 4CP reduction program. For most Texas C&I customers, the combination of operational tweaks and a well‑designed procurement strategy can lower transmission spend by 5‑15%, translating into thousands of dollars saved annually. When the effort outweighs the potential savings, a fixed‑rate hedge or simply accepting the baseline charge may be the smarter choice.