What is 4CP and how can Texas businesses reduce 4CP charges?
Four‑coincident‑peak (4CP) charges are the largest component of transmission costs for Texas commercial and industrial customers. They are based on a site’s share of the five‑minute intervals that define the four summer peaks across ERCOT’s load zones. Understanding how the peaks are set, using demand‑shaping tools, and weighing the operational impact can cut transmission spend by up to 27% for disciplined users.
Thesis
Four‑coincident‑peak (4CP) transmission charges can represent 30% or more of a Texas C&I electric bill, but they are not a fixed fee. They are calculated from a site’s actual demand during the five‑minute intervals that define ERCOT’s four summer peak periods. By forecasting those intervals, shifting load, or participating in demand‑response programs, a business can lower its share of the 4CP allocation and reduce its overall transmission spend.
The short answer: identify the four peak windows, measure your demand in each 15‑minute block, and use a combination of real‑time monitoring, predictive analytics, and targeted curtailment to shrink your contribution. If the cost of the operational changes exceeds the expected transmission savings—typically a few cents per kWh—then chasing 4CP is not worth the pain.
How ERCOT Determines the Four Summer Peaks
The data source
ERCOT publishes the System Load Zone (SLZ) demand data in five‑minute intervals. The Public Utility Commission of Texas (PUCT) uses this data to calculate the four "coincident peak" intervals for each zone. The process runs each year after the summer season (June‑September) closes.
Selecting the peaks
- Identify the highest demand interval in each of the four ERCOT load zones (North, South, West, and Houston).
- Rank the intervals by total system demand.
- Pick the top four intervals that are at least 15 minutes apart.
These four intervals become the reference points for the next year’s 4CP allocation.
Translating peaks into charges
Each commercial or industrial (C&I) customer’s 4CP charge is proportional to its demand during those four intervals, measured in kilowatts (kW). The formula is:
4CP Charge = (Customer kW in 4CP intervals / Total kW in 4CP intervals) × Total 4CP Transmission Cost
The total cost is set by ERCOT’s transmission tariff and includes the 4‑coincident‑peak component of the 4‑CP charge, which is roughly 50% of the overall transmission bill.
Predicting Your 4CP Exposure
UPG’s Energy Health Check
United Power Group (UPG) offers a free Energy Health Check that audits your most recent bill, verifies the TDSP delivery‑charge audit, and extracts the 4CP usage from your ERCOT data. For our 8,000+ business customers we have identified an average annual savings of $3.2 M, largely driven by 4CP optimization.
Forecasting tools
- Historical baseline – Compare the prior year’s 4CP intervals to your demand profile.
- Weather‑adjusted models – ERCOT’s peak demand correlates strongly with temperature (≈ 0.5 kW per °F per MW of load).
- Real‑time monitoring – A SCADA‑grade meter that records 5‑minute kW values feeds directly into a dashboard that flags when you are approaching a peak interval.
Our 25+ years of Texas market expertise allow us to produce a 90% confidence interval for each of the four peak windows, giving you a reliable target for load‑shaping actions.
Strategies to Reduce Your 4CP Share
1. Load shifting to off‑peak windows
Move discretionary processes (e.g., water treatment, refrigeration defrost cycles) to the evening or early morning. Even a 5% reduction in demand during a peak 15‑minute block can shave $0.02–$0.04 per kWh off the transmission component.
2. Demand‑response enrollment
Participate in ERCOT‑approved demand‑response (DR) programs such as the Emergency Response Service (ERS) or the Capacity‑Based DR market. A 10 kW curtailment for a single 15‑minute interval can reduce your 4CP allocation by roughly 0.5% of the total zone peak.
3. On‑site generation and storage
A 500 kW solar‑plus‑battery system can supply a meaningful slice of the peak demand. When the battery discharges during the identified 4CP windows, you effectively replace transmission‑charged kW with self‑generated kW, cutting the 4CP share linearly.
4. Power factor correction
Although 4CP is based on kW, a low power factor can increase overall demand charges, prompting you to run equipment at higher kW during peaks. Installing capacitor banks to achieve a PF ≥ 0.95 reduces the kW footprint and indirectly lowers the 4CP contribution.
5. Contractual hedging
Fixed‑rate or block contracts can lock in a transmission component, but they do not eliminate the 4CP allocation. However, a well‑structured block contract that aligns with your anticipated peak profile can smooth cash flow and reduce exposure to volatile ERCOT LMP spikes.
When Chasing 4CP Isn’t Worth It
High operational complexity
If your facility runs a continuous process that cannot be interrupted without jeopardizing product quality (e.g., steel rolling, chemical reactors), the cost of installing real‑time metering, predictive software, and DR enrollment may exceed the transmission savings.
Marginal savings threshold
Our internal analysis shows that for most customers, a net reduction of less than 0.5% of total transmission spend (≈ $0.01/kWh) does not justify the capital expense of a battery system or extensive automation.
Regulatory risk
ERCOT periodically revises the 4CP methodology. A change in the definition of “coincident” could render a multi‑year investment less effective. In such cases, a flexible, low‑capex approach—like demand‑response participation—offers a safer hedge.
The Role of the TDSP Delivery‑Charge Audit
Transmission‑related delivery charges are billed by the local Transmission and Distribution Service Provider (TDSP) – Oncor, CenterPoint, AEP Texas, or TNMP. The TDSP charge includes a component that mirrors the 4CP allocation. UPG’s free audit verifies that the TDSP has correctly applied the 4CP factor to your bill, catching over‑charges that can amount to $10 k–$50 k annually for mid‑size firms.
Bottom Line
4CP charges are a variable, usage‑based transmission cost that can be managed through accurate forecasting, targeted load shifting, and participation in demand‑response programs. United Power Group’s Energy Health Check and predictive analytics have helped clients achieve up to a 27% reduction in overall transmission spend. For businesses with flexible loads, the upside outweighs the operational effort; for those with rigid processes, a modest DR enrollment may be the only cost‑effective path.
What is 4CP and how can Texas businesses reduce 4CP charges? — quick questions
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What is 4CP and how Texas businesses can reduce 4CP charges
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Four‑coincident‑peak (4CP) transmission charges are a major, often overlooked, cost component for Texas C&I customers. This article explains how ERCOT defines the four summer peaks, how the charges are calculated, and which operational and procurement tactics can lower a site’s 4CP bill without sacrificing reliability. It also outlines when the effort outweighs the savings.
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Four‑coincident‑peak (4CP) transmission charges are a significant, often overlooked, cost driver for Texas commercial and industrial customers. By understanding how ERCOT identifies the four summer peaks and how a site’s demand during those 15‑minute intervals translates into next‑year transmission fees, businesses can apply predictive analytics, load‑shifting, and demand‑response tactics to lower their 4CP bill without sacrificing reliability.
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