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

The bottom line on 4CP

Four‑coincident‑peak (4CP) transmission charges are a fixed component of a Texas business’s electric bill that reflects the cost of using the ERCOT transmission system during the four most congested 15‑minute intervals of the summer. Because the charge is based on a site’s share of load during those intervals, even a modest reduction in demand at the right times can cut the annual transmission bill by thousands of dollars. The key is to understand how ERCOT selects the peaks, how the charge is calculated, and which operational levers provide the best return on effort.

How ERCOT defines the four summer peaks

ERCOT’s 4CP methodology is set out in the Public Utility Commission of Texas (PUCT) Order No. 1‑13‑004. Each summer (June 1 through Sept 30) ERCOT runs a 15‑minute LMP (locational marginal price) analysis for every node on the grid. The four 15‑minute intervals with the highest system‑wide congestion costs become the “coincident peaks.” These intervals are not fixed calendar dates; they shift year‑to‑year based on weather, generation outages, and transmission constraints.

Identifying the peaks

1. Data collection – ERCOT aggregates real‑time demand and generation data from all TDSP service territories (Oncor, CenterPoint, AEP Texas, TNMP).
2. Congestion scoring – For each 15‑minute interval, ERCOT calculates the total congestion cost across the network.
3. Selection – The four intervals with the highest congestion cost become the 4CP windows.
4. Publication – ERCOT releases the 4CP timestamps in its annual “Transmission Cost Allocation” report, typically in early February.

Because the peaks are based on congestion rather than temperature alone, a hot day with abundant wind generation may not be a 4CP interval, while a milder day with a transmission outage could be.

How the charge is allocated to individual sites

The 4CP charge appears on a commercial/industrial bill as a separate line item, expressed in $/kW of peak demand. The calculation follows three steps:

1. Determine site demand during each peak interval – ERCOT provides 15‑minute demand data for every node. Your site’s demand (in kW) for each of the four intervals is summed.
2. Calculate the site’s share of total 4CP demand – The site’s total 4CP demand is divided by the aggregate demand of all customers in the same TDSP service area during the same intervals.
3. Apply the transmission cost factor – PUCT sets a cost factor (cents/kW) for each TDSP based on the total transmission investment needed to relieve congestion. The factor is multiplied by the site’s share to produce the annual 4CP charge.

For example, if a Texas manufacturer draws 500 kW during each of the four peaks, its total 4CP demand is 2,000 kW‑hours. If the total 4CP demand for the Oncor service area is 10 GW‑hours, the manufacturer’s share is 0.02 % (2,000 kW‑h ÷ 10,000,000 kW‑h). If Oncor’s cost factor is $0.85 /kW‑year, the manufacturer’s 4CP charge is 0.02 % × $0.85 × 1,000 kW ≈ $170 per year. While the dollar amount may seem modest, for larger facilities with several megawatts of demand the charge can exceed $10,000 annually.

Why 4CP matters for Texas businesses

• Predictable cost component – Unlike energy usage, the 4CP charge is a fixed annual fee based on past peak behavior. It does not fluctuate with wholesale power prices, making it a sizable portion of the total transmission bill.
• Impact on total cost of ownership – For a 5 MW facility, a 10 % reduction in 4CP demand can shave $15,000–$20,000 off the yearly bill, directly improving the bottom line.
• Regulatory exposure – The PUCT reviews the cost factor each year. A higher factor, driven by new transmission projects, can increase the charge for all customers, amplifying the value of demand‑side reductions.

Prediction services: knowing the peaks before they happen

Because the 4CP intervals are announced only after the summer ends, proactive businesses rely on forecasting tools to anticipate likely peak windows. UPG’s Energy Health Check includes a 4CP prediction module that combines:

• Historical ERCOT congestion patterns – Analyzing the past five years of 4CP timestamps.
• Weather modeling – Using NOAA temperature forecasts and wind‑generation outlooks to gauge congestion risk.
• Load‑profile simulation – Mapping your facility’s hourly demand against the projected grid conditions.

The model typically identifies a 2‑day window with a 70 % confidence level for each of the four peaks. Armed with that insight, operations teams can schedule non‑essential processes, shift batch production, or pre‑cool warehouses to avoid high demand during the forecasted intervals.

Operational levers to lower 4CP demand

1. Load shifting and scheduling

Moving discretionary loads (e.g., refrigeration defrost cycles, water‑pump priming, or non‑critical HVAC) to off‑peak hours can reduce demand during the identified 4CP windows. Even a 5 % reduction in peak‑interval demand translates to a proportional cut in the annual charge.

2. On‑site generation and storage

• Solar plus battery – A 500 kW solar array paired with a 2 MWh battery can shave 200–300 kW of demand during a hot afternoon peak. The battery discharges during the 4CP interval, then recharges when prices are low.
• Natural‑gas‑fired peaker – For facilities with high process loads, a small gas‑turbine can provide on‑demand capacity to keep the site below its 4CP threshold.

3. Demand response (DR) enrollment

ERCOT’s DR program allows participants to receive a signal when the grid is constrained. By curtailing 10–15 % of load within a 15‑minute window, a site can avoid the 4CP charge for that interval and earn a DR payment. UPG has helped more than 8,000 customers enroll in DR, saving an average of $3.2 M across the portfolio each year.

4. Equipment upgrades and controls

Variable‑frequency drives (VFDs) on motors, high‑efficiency compressors, and advanced building‑automation systems can reduce peak demand by 3–7 % without sacrificing productivity. The capital cost is often recouped within 2–3 years when the 4CP savings are included.

When chasing 4CP isn’t worth it

Not every facility should invest heavily in 4CP mitigation. Consider the following thresholds:

• Low peak demand – If a site’s maximum 15‑minute demand is under 250 kW, the annual 4CP charge is typically less than $500. The ROI on sophisticated storage or DR participation may be negative.
• High operational rigidity – Manufacturing processes that cannot be shifted without costly downtime may find the operational pain outweighs the $10,000‑$20,000 potential savings.
• Short‑term occupancy – For temporary projects or lease‑back arrangements lasting less than a year, the upfront cost of retrofits is unlikely to be recovered before the next 4CP cycle.

In these cases, a simple “energy health check” to confirm that the site’s demand profile is already low during peak intervals may be the most cost‑effective approach.

A practical roadmap for Texas businesses

1. Run a free Energy Health Check – UPG reviews your most recent bill, audits TDSP delivery charges, and provides a 4CP exposure estimate.
2. Identify the next 4CP windows – Use our prediction service to flag likely peak intervals for the upcoming summer.
3. Quantify the savings – Model the impact of a 5 % demand reduction during each interval. Multiply by the PUCT cost factor for your TDSP to get a dollar estimate.
4. Select the right lever – Choose between load shifting, DR enrollment, or modest on‑site storage based on ROI and operational constraints.
5. Implement and monitor – Deploy controls, schedule processes, and track real‑time demand during the 4CP windows. Adjust as needed for the next year’s allocation.

Bottom line

Four‑coincident‑peak transmission charges are a predictable, yet often overlooked, cost for Texas commercial and industrial electricity users. By understanding how ERCOT selects the peaks, leveraging forecasting tools, and applying targeted demand‑side strategies, businesses can reduce their 4CP share and improve profitability. However, the effort must be matched to the size of the charge and the flexibility of operations; for low‑demand or highly constrained facilities, a simple bill audit may be the most sensible path.