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

Thesis

Four‑coincident‑peak (4CP) transmission charges are a unique component of the Texas wholesale electricity market that can add a significant, often under‑appreciated, cost to a commercial or industrial (C&I) electric bill. The charges are calculated from a customer’s electricity usage during the four highest‑demand 15‑minute intervals that occur across the ERCOT grid each summer (June 1 through Sept 30). By identifying those intervals, forecasting when they will occur, and applying disciplined demand‑shaping or curtailment, a Texas business can reduce its next‑year 4CP allocation and improve overall spend.

In practice, 4CP can account for up to 30 % of a C&I customer’s transmission charge, translating to $0.01‑$0.03 per kWh in many markets. The good news is that the same data that drives the charge also provides a roadmap for reduction: the ERCOT market publishes the exact 15‑minute intervals that form the four peaks, and the Public Utility Commission of Texas (PUCT) requires TDSPs (Oncor, CenterPoint, AEP Texas, TNMP) to allocate those costs transparently. Armed with that information, a senior energy consultant can design a cost‑effective plan that balances operational constraints with financial upside.

How ERCOT Defines the Four Coincident Peaks

Seasonal window and data source

ERCOT’s 4CP methodology looks at the summer window (June 1 – Sept 30) for each calendar year. Within that window, ERCOT calculates the system‑wide load for every 15‑minute interval and identifies the four intervals that have the highest coincident demand across the grid. "Coincident" means the interval when the most generators are simultaneously delivering power to meet the highest overall load.

Allocation to individual customers

Each TDSP receives the four system‑wide peak intervals from ERCOT and then allocates a portion of the associated transmission cost to its customers based on their share of load during those exact intervals. The share is calculated as:

Customer 4CP Share = (Customer kWh during peak interval) / (Total kWh delivered by TDSP during same interval)

Because the allocation is proportional to actual consumption, a site that runs a large process during any of the four peaks will see a disproportionate increase in its transmission bill.

Identifying the Four Peaks for Your Site

1. ERCOT publishes the peak timestamps – after each summer, ERCOT releases a PDF that lists the four 15‑minute intervals (date, hour, and minute) that formed the system‑wide peaks.
2. TDSPs provide a site‑level breakdown – under PUCT Rule 31, TDSPs must give each customer a detailed bill that shows the kWh used in each of the four intervals and the resulting $ charge.
3. Energy Health Check – UPG’s free Energy Health Check includes a bill‑review that extracts those interval values, quantifies the dollar impact, and benchmarks it against the 8,000+ businesses we serve.

Financial Impact of 4CP

Average 4CP cost: $0.02/kWh (varies by location and congestion). For a 2 MW facility that runs 4,000 hours per year, 4CP can add roughly $1,600 – $2,400 to the annual transmission bill. Potential reduction: Our clients have achieved up to a 27 % overall spend reduction, and in many cases a 10‑15 % cut to the 4CP component alone, simply by shifting load away from the identified intervals.

Strategies to Reduce 4CP Charges

1. Predictive analytics and interval forecasting

UPG partners with third‑party forecasting services that model ERCOT load, weather, and generation outages to predict which 15‑minute windows are likely to become the next year’s 4CP intervals. By overlaying your internal production schedule, you can flag high‑risk periods months in advance.

2. Demand shifting within the same day

If a process can be moved from a predicted peak interval to a lower‑demand interval on the same day, the 4CP share drops instantly. For example, a 500 kW batch that normally runs at 2 PM (a typical summer peak time) can be rescheduled to 10 AM when system load is 10‑15 % lower.

3. Automated curtailment via EMS

Modern Energy Management Systems (EMS) can receive the ERCOT‑published peak timestamps in real time and automatically shed non‑critical load for the 15‑minute window. A 100 kW shed for one interval reduces the 4CP charge by roughly $2 – $3.

4. Load factor improvement

Increasing the overall load factor (kWh/kW) dilutes the impact of any single interval. Adding baseline loads—such as HVAC pre‑conditioning or water‑heater pre‑heat—during off‑peak hours raises total kWh without raising peak kW, lowering the proportion of consumption that falls in the four peaks.

5. Participation in demand‑response programs

ERCOT’s ancillary services market offers payments for voluntary load reductions during system stress. By enrolling in a demand‑response event that coincides with a 4CP interval, you not only earn revenue but also eliminate the associated transmission charge for that interval.

6. Contractual hedging with fixed‑rate or block structures

While 4CP is a transmission cost, the underlying energy price can be hedged. A fixed‑rate contract that includes a transmission component can lock in a lower per‑kWh transmission rate, reducing the volatility of the 4CP charge. UPG’s supplier panel of 30+ top‑tier REPs can structure a block‑and‑index hybrid that caps exposure.

When Chasing 4CP Isn’t Worth the Pain

Not every site will see a meaningful ROI from aggressive 4CP mitigation. Consider the following thresholds:

• Low baseline 4CP share – if the 4CP component is less than 5 % of total transmission spend, the absolute dollar savings may be under $500 / year, making complex automation less attractive.
• Operational rigidity – processes that cannot be shifted without jeopardizing product quality, safety, or regulatory compliance should not be forced into a 4CP strategy.
• High curtailment cost – if the cost of shutting down a critical load (e.g., lost production, overtime, or restart penalties) exceeds the estimated 4CP savings, the net effect is negative.
• Short‑term tenancy – for a facility expected to vacate the site within 12‑18 months, the upfront investment in EMS or forecasting tools may not amortize.

In those cases, the prudent approach is to rely on the free Energy Health Check to confirm the 4CP impact and focus on broader cost‑reduction levers such as supplier negotiation or overall demand management.

Bottom line

4CP charges are a transparent, data‑driven cost that Texas C&I customers can influence. By reviewing the ERCOT‑published peak intervals, leveraging predictive analytics, and applying targeted demand‑shaping tactics, many businesses achieve a 10‑15 % reduction in their 4CP allocation, translating to several thousand dollars saved annually. However, the effort must be weighed against operational constraints and the size of the charge. UPG’s 25 + years of Texas market expertise and free Energy Health Check give you the facts you need to decide whether a 4CP program is a worthwhile investment.