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

Thesis

Four‑coincident‑peak (4CP) transmission charges are a volume‑based cost that can add tens of thousands of dollars to a Texas commercial or industrial electricity bill each year. The charge is not a function of total kWh used; it is driven by a site’s share of the four most congested 15‑minute intervals in the ERCOT summer. By knowing how those intervals are selected, leveraging forecasting services, and applying disciplined load‑shaping, a business can reduce its 4CP allocation and improve its bottom line.

How 4CP Works in ERCOT

The four summer peaks

ERCOT defines the summer season as June 1 through September 30. During that window it records the system‑wide Locational Marginal Price (LMP) for every 15‑minute interval on each transmission node. The four intervals with the highest LMPs on a given node become the coincident peaks for that node. Those intervals are typically clustered around hot afternoons when air‑conditioner load spikes and transmission constraints tighten.

Allocation to customers

Transmission‑service providers (TDSPs) such as Oncor, CenterPoint, AEP Texas, and TNMP calculate each customer’s share of the 4CP charge by multiplying the customer’s demand (kW) during each of the four intervals by the node’s 4CP transmission factor (a $/kW value set by ERCOT). The sum of the four products becomes the customer’s 4CP bill for the next calendar year. Because the factor is expressed in $/kW, a 10 kW reduction during a peak interval can shave roughly $100–$150 from the charge, depending on the node’s factor.

Why 4CP matters more than energy rates

A typical Texas C&I customer pays a retail energy rate of 8–12 cents/kWh and a demand charge of $10–$20/kW per month. 4CP is an additional demand‑related charge that is applied once per year but is based on the most expensive intervals, not the average. For a 200 kW facility with a 4CP factor of $12/kW, the charge can exceed $2,400 annually—often more than the monthly demand charge for the same capacity.

Predicting the Peaks

In‑house analytics vs. UPG’s Energy Health Check

Accurately forecasting which 15‑minute windows will become the 4CP intervals requires granular load data, weather modeling, and knowledge of ERCOT’s transmission constraints. Many firms rely on spreadsheet regressions that miss the nuance of nodal congestion. United Power Group (UPG) offers a free Energy Health Check that includes a TDSP delivery‑charge audit and a 12‑month load‑profile analysis. Our 25 + years of Texas market experience let us pinpoint the likelihood of each interval becoming a 4CP event with a confidence interval of ±10 %.

Weather‑driven drivers

The primary driver of 4CP intervals is temperature. ERCOT’s historical data shows that the top four peaks usually occur when the dry‑bulb temperature exceeds 95 °F and the humidity index pushes the cooling load above 150 % of a building’s baseline. By overlaying a short‑range weather forecast (Day 1–Day 5) on the load model, UPG can flag high‑risk days up to two weeks in advance.

Strategies to Reduce 4CP Allocation

1. Targeted demand response during identified windows

The most direct method is to shed load during the predicted peak intervals. Options include:

• Pre‑cooling the building 30–45 minutes before the forecasted peak and then cycling the HVAC off.
• Load shifting non‑critical processes (e.g., water‑treatment pumps, refrigeration defrost cycles) to off‑peak hours.
• Automated demand‑response (ADR) platforms that receive ERCOT’s real‑time LMP feed and trigger a pre‑programmed load shed when the price exceeds a threshold (commonly $200/MWh).

A 5 % reduction in demand during each of the four peaks typically translates to a 2‑3 % drop in the overall 4CP bill, equating to $5,000–$10,000 for a mid‑size manufacturer.

2. Capacity‑based contract structuring

Fixed‑rate contracts with a block component (e.g., 150 kW block at $12/kW) can lock in a portion of the demand charge, but the 4CP charge remains variable. However, by negotiating a capacity‑adjusted block that aligns with the firm’s peak‑shaving capability, the customer can reduce exposure to the most expensive intervals.

3. On‑site generation and storage

Distributed energy resources (DER) such as solar PV combined with battery storage can directly offset demand during the 4CP windows. A 250 kW battery that discharges for the four 15‑minute peaks can eliminate up to 1,000 kW‑minutes of demand, shaving roughly $120–$150 per peak interval. The economics improve when the battery is also used for price arbitrage during high LMP periods.

4. Process redesign

For process‑intensive facilities, a modest redesign—moving a batch operation from a hot afternoon to a cooler morning—can eliminate the need for any active curtailment. The cost of re‑scheduling is often lower than the recurring 4CP charge, especially when the operation is not time‑critical.

When Chasing 4CP Isn’t Worth It

High baseline demand vs. marginal reduction

If a facility’s average demand is already above 300 kW, a 5 % reduction during four 15‑minute intervals yields a modest dollar impact relative to the effort required. In such cases, focusing on overall demand‑charge reduction or energy‑rate negotiation may provide a better ROI.

Operational constraints

Manufacturing lines that cannot be interrupted without causing scrap, safety incidents, or regulatory violations should not pursue aggressive 4CP curtailment. The risk of production loss can outweigh the $10,000–$15,000 annual savings.

Cost of technology

Battery storage systems capable of delivering 250 kW for four 15‑minute intervals cost roughly $250,000–$300,000 installed. With a 4CP savings of $12,000 per year, the simple payback exceeds 20 years, making the investment unattractive unless the battery also provides other value streams (e.g., backup power, ancillary services).

The Role of UPG in a 4CP Program

United Power Group brings three distinct advantages:

1. Data‑driven insight – Our free Energy Health Check audits TDSP delivery charges and isolates the 4CP component of your bill.
2. Supplier leverage – With a panel of 30+ top‑tier REPs, we can secure contracts that incorporate demand‑response clauses tied to 4CP performance.
3. Implementation support – From installing automated ADR controllers to designing a solar‑plus‑storage strategy, we have delivered $3.2 M in annual savings across 8,000+ business customers.

By partnering with UPG, a Texas business can move from reactive bill review to proactive 4CP management, often achieving up to a 27 % reduction in total transmission spend.

Bottom line

4CP charges are a predictable, yet often overlooked, cost driver for Texas C&I customers. The charge is set by a site’s demand during the four most expensive 15‑minute intervals in the summer, and it can be reduced through accurate forecasting, targeted load curtailment, strategic contract structuring, and, where justified, on‑site generation or storage. However, the operational and capital costs of chasing every marginal kW must be weighed against the potential savings. A disciplined, data‑backed approach—such as the one UPG provides—delivers the most reliable path to meaningful cost reduction.