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

The bottom line: 4CP is a cost you can manage, not a mystery fee

Four‑coincident‑peak (4CP) transmission charges are calculated from a customer’s share of load during the four highest‑demand 15‑minute intervals on the ERCOT grid each summer (June‑September). Those intervals become the benchmark for the next year’s transmission bill. By knowing when the peaks occur, how your site’s demand stacks against the grid, and which demand‑side actions move the needle, you can shave anywhere from a few dollars to tens of dollars per kilowatt of peak demand. In many cases the savings outweigh the operational effort, but there are clear break‑points where chasing 4CP adds more complexity than value.

How ERCOT defines the four summer peaks

ERCOT runs a nodal market where every 15‑minute interval has a locational marginal price (LMP). During the summer months the system experiences its highest load, and ERCOT identifies the four 15‑minute intervals with the greatest total system demand. Those intervals are published after the season ends and become the reference for the next calendar year’s 4CP allocation. The process is transparent:

1. Data collection – ERCOT records real‑time demand at every node every 15 minutes.
2. Peak selection – The four intervals with the highest aggregate MW across the entire ERCOT footprint are selected.
3. Publication – ERCOT releases the dates, times, and system‑wide demand figures in its annual Transmission Cost Allocation (TCA) report.

Because the peaks are system‑wide, any load that coincides with those intervals, regardless of where it sits on the grid, contributes to the 4CP charge.

Translating peak participation into a dollar amount

ERCOT’s transmission cost structure includes a 4CP component that typically represents about 30 % of the total transmission charge. The charge is expressed in cents per kilowatt‑hour (c/kWh) and is allocated based on each customer’s share of load during the four peak intervals.

Example calculation

• System‑wide load during a 4CP interval: 30 GW (30,000,000 kW)
• Your site’s demand in that interval: 200 kW
• Share of the interval: 200 kW / 30,000,000 kW = 0.0000067 (0.00067 %)
• 4CP transmission component (average for 2023): $0.12 per kWh
• Allocated 4CP cost: 0.0000067 × $0.12 = $0.0000008 per kWh

If the site consumes 10,000 kWh during the four peak intervals combined, the 4CP charge would be roughly $0.008 – a tiny amount per interval but a measurable line item when scaled to a large industrial load profile. Over a full year, firms with high summer peaks can see $5‑$15 per kW of peak demand added to their transmission bill.

Why 4CP matters for Texas C&I firms

• Budget predictability – 4CP is a fixed‑rate component, so a sudden spike in a single summer day can lock in higher charges for the next year.
• Competitive parity – Many REPs (Retail Electric Providers) pass the full 4CP cost to customers. Reducing your share directly improves your net electricity spend.
• Regulatory exposure – The PUCT (Public Utility Commission of Texas) monitors transmission cost allocation; firms that consistently sit in the top‑percentile of 4CP participation may attract scrutiny.

Strategies to reduce 4CP exposure

1. Forecast‑driven load shaping

Accurate short‑term forecasts (hour‑ahead to day‑ahead) let you anticipate when a 4CP interval is likely to occur. Modern prediction services, such as the one offered through United Power Group’s Energy Health Check, overlay ERCOT’s historical peak patterns with your own demand profile to flag high‑risk windows. When a forecasted 4CP window aligns with a non‑critical process, you can shift that load to off‑peak hours.

2. Demand response participation

Enroll in ERCOT‑approved demand‑response (DR) programs that provide automatic load shed during system emergencies. While DR is traditionally used for reliability, many programs allow you to pre‑schedule reductions during known 4CP intervals. The incentive payment often exceeds the incremental 4CP cost you avoid, creating a net win.

3. On‑site generation and storage

• Solar + battery – A 500 kW solar array paired with a 2 MWh battery can shave 200‑300 kW of load during a 4CP interval, especially if you schedule a discharge just before the interval hits.
• Combined heat and power (CHP) – For process‑intensive facilities, a CHP plant can offset both electricity and thermal demand, reducing the net grid draw during the critical 15‑minute windows.

4. Load factor improvement

A higher load factor (average demand ÷ peak demand) dilutes the impact of any single interval. By smoothing daily operations—running compressors, chillers, or batch processes continuously rather than in short spikes—you lower the probability of being in the top‑percentile during a 4CP interval.

5. Contractual hedging

While 4CP is a fixed‑rate transmission component, you can lock in overall electricity cost certainty with a fixed‑rate power contract that includes a “4CP carve‑out” clause. UPG’s contract portfolio offers block and index structures that let you price the 4CP portion separately, protecting you from unexpected spikes.

When chasing 4CP isn’t worth it

• Low‑margin operations – If the incremental savings are less than $2 per kW of peak demand, the operational overhead of constant monitoring may erode profit.
• Critical process constraints – Facilities that cannot shift load without jeopardizing product quality (e.g., continuous casting, pharmaceutical batch runs) should weigh the risk of production loss against the modest 4CP reduction.
• Small‑scale sites – For customers under 250 kW of peak demand, the total 4CP charge often falls below $500 annually. In such cases a simple audit during the free Energy Health Check is sufficient; deeper interventions rarely pay off.

United Power Group’s role

UPG’s Free Energy Health Check includes a detailed 4CP audit, identifying the exact intervals where your site contributed load and quantifying the dollar impact. With 8,000+ business customers and an average annual savings of $3.2 M across the portfolio, UPG routinely achieves up to 27 % reduction in total electricity spend by combining 4CP mitigation with broader procurement strategies.

Bottom line

4CP charges are a transparent, data‑driven component of Texas transmission costs. By understanding how ERCOT selects the four summer peaks, measuring your site’s share, and applying targeted demand‑side actions—forecast‑driven load shaping, DR participation, on‑site generation, load‑factor improvement, or contractual hedging—you can turn a fixed cost into a controllable expense. For most mid‑size and large C&I firms, the savings justify the effort; for very small or highly constrained operations, a simple audit may be the most cost‑effective path.