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

Thesis

Texas commercial and industrial (C&I) customers pay a distinct transmission charge called Four‑Coincident‑Peak (4CP). The charge reflects a site’s contribution to the four highest‑load 15‑minute intervals in each summer month (June‑September). Because 4CP can represent 10‑20% of a wholesale electricity bill, reducing it is a tangible lever for cost control. The answer isn’t a blanket demand‑reduction program; it is a data‑driven, interval‑level strategy that aligns with ERCOT’s market rules and the Public Utility Commission of Texas (PUCT) guidelines.

How 4CP is Calculated

Identifying the Four Summer Peaks

ERCOT publishes hourly load data for each Transmission and Distribution Service Provider (TDSP). For each month from June through September, the system operator isolates the four 15‑minute intervals with the highest system‑wide demand. These are the "coincident peaks." The intervals are not fixed dates; they shift year‑to‑year based on weather, economic activity, and generation mix.

Allocating Costs to Individual Sites

Each TDSP receives the total 4CP charge from the PUCT, which is then allocated to its customers based on their proportional usage during the identified intervals. The formula is:

Customer 4CP Share = (Customer kWh in 4CP intervals) / (Total TDSP kWh in 4CP intervals) × Total TDSP 4CP charge

Because the denominator is the same for all customers on a TDSP, a site that loads heavily during any of the four peaks pays a larger slice of the bill, regardless of its annual consumption.

Impact on Next‑Year Transmission Charges

The 4CP allocation for a given year becomes part of the transmission component on the next year’s TDSP invoice. For a typical Texas C&I customer, the transmission line can be $0.02‑$0.04 per kWh, so a 10% reduction in the 4CP share translates to roughly $0.002‑$0.004 per kWh saved—equivalent to $5,000‑$15,000 on a $1‑$3 M annual electricity spend.

Prediction Services: Knowing the Peaks Before They Hit

Accurate forecasting is the foundation of any 4CP reduction plan. UPG’s Free Energy Health Check includes a 12‑month TDSP delivery‑charge audit and a 15‑minute interval load profile review. From there, we can layer:

• Historical Pattern Analysis – ERCOT’s market data shows that the first two weeks of July and the last week of August historically host the highest peaks in most ERCOT zones.
• Weather‑Driven Load Modeling – Using NOAA temperature forecasts, we predict cooling‑degree‑hour (CDH) spikes that drive the four peaks.
• Load‑Shift Simulations – By modeling a 5‑10% demand reduction during the identified intervals, we estimate the resulting 4CP share drop.

Our clients typically see a 5‑12% reduction in 4CP allocation after implementing the recommended actions, contributing to the overall 27% spend reduction we achieve across our 8,000+ business customers.

Curtailment Strategies That Work

1. Automated Demand Response (ADR)

Deploy an ADR platform that receives ERCOT’s real‑time 15‑minute market data and automatically sheds non‑critical loads (e.g., HVAC pre‑cooling, refrigeration defrost cycles) when a peak interval is forecasted. The response time is under 5 minutes, keeping production impact minimal.

2. Shiftable Loads

Identify processes that can be moved to off‑peak windows—batch production, water‑treatment pumps, or data‑center cooling set‑points. A modest 1 MW shift during a single 15‑minute peak can shave up to 0.5% off the site’s 4CP share.

3. On‑Site Energy Storage

A 2 MWh battery, cycled only during the four peak intervals, can provide up to 2 MW of instantaneous demand reduction. While the capital cost is high, the battery’s value is amplified when the site sits near the top of the 4CP curve, often delivering a payback within 5‑7 years.

4. Load Factor Improvement

Improving the overall load factor—raising average demand relative to peak—dilutes the impact of any single 15‑minute interval. Simple measures include tightening HVAC set‑points by 1‑2 °F during non‑peak hours and optimizing lighting schedules.

5. Contractual Levers

When negotiating a Fixed‑Rate or Block & Index contract with a RE​P, request a clause that caps 4CP exposure or provides a credit if the site’s 4CP share exceeds a benchmark. While not common, UPG’s supplier panel of 30+ top‑tier RE​Ps can often secure such terms for high‑volume customers.

When Not to Chase 4CP

High Operational Risk

If curtailment requires shutting down critical production lines, the cost of lost output can far outweigh the transmission savings. For facilities with tight throughput tolerances (e.g., semiconductor fabs), the risk profile is prohibitive.

Small Load Profiles

Sites with annual consumption under 500 kWh per month typically have a negligible 4CP share. The administrative overhead of monitoring 15‑minute intervals may not be justified.

Limited Forecast Accuracy

In years with atypical weather patterns—such as a cooler summer—the forecasted peaks may not materialize. Investing in ADR hardware or storage for a single season could result in a negative ROI.

Contractual Constraints

Some TDSPs embed a “minimum 4CP charge” that cannot be reduced below a baseline. If a customer’s baseline already represents the majority of the charge, further curtailment yields diminishing returns.

Implementation Roadmap

1. Data Collection – Pull the last 24 months of 15‑minute interval usage from the TDSP portal.
2. Peak Identification – Use ERCOT’s published 4CP intervals to calculate the site’s current share.
3. Forecast Modeling – Apply weather‑adjusted load forecasts for the upcoming summer.
4. Strategy Selection – Choose the least disruptive curtailment method(s) based on ROI analysis.
5. Pilot Test – Run a one‑month pilot during the first identified peak to validate savings.
6. Full‑Scale Rollout – Deploy the chosen solution across all four peaks, monitor performance, and adjust as needed.
7. Review & Adjust – After the summer, re‑run the Health Check to quantify the actual 4CP reduction and feed results into next year’s plan.

Bottom line

4CP charges are a predictable, quantifiable component of Texas transmission costs. By leveraging interval‑level data, weather‑driven forecasts, and targeted demand‑response or storage solutions, most C&I customers can reduce their 4CP share by 5‑15% and contribute to the broader $3.2 M annual savings that UPG delivers across its client base. The key is to balance the operational impact against the financial upside and to use a disciplined, data‑first approach.