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

Four‑coincident‑peak (4CP) transmission charges are a predictable, but often under‑appreciated, cost driver for Texas C&I customers. By grasping how ERCOT defines the four summer peaks and how a site’s usage during those 15‑minute intervals translates into next‑year transmission fees, a business can cut a meaningful slice off its electric bill without sacrificing reliability.

The short answer is that Texas businesses can lower 4CP charges by shifting or shaving load during the identified peak windows, leveraging predictive analytics, and enrolling in demand‑response programs that reward curtailment. When the operational disruption required to shave a few megawatts outweighs the potential dollar savings—typically for low‑margin processes or critical load—pursuing 4CP reduction may not be justified.

How ERCOT Calculates 4CP

Identifying the Four Summer Peaks

ERCOT’s 4CP methodology looks at the summer months of June, July, August and September. For each month, ERCOT scans the 15‑minute market intervals and selects the single interval with the highest system‑wide load. Those four intervals—one per month—become the “coincident peaks.” The intervals are fixed for the next calendar year, and the transmission charge for each participating Transmission Service Provider (TSP) is based on the amount of energy a customer consumes during those exact 15‑minute windows.

Allocating Transmission Costs

Each TSP (Oncor, CenterPoint, AEP Texas, TNMP, etc.) calculates a per‑kilowatt‑hour charge for its portion of the transmission system. The charge is multiplied by the customer’s kWh usage in the four peak intervals, producing the 4CP line item on the bill. Because the charge is applied to actual consumption—not peak demand—customers that can shift load out of those specific intervals see a direct reduction in the dollar amount. The 4CP charge typically ranges from $0.02 to $0.05 per kWh, depending on the TSP’s cost recovery needs and the overall transmission load factor.

Strategies to Reduce 4CP

Load Shifting and Peak Shaving

The most straightforward tactic is to move discretionary processes—such as HVAC pre‑cooling, water‑treatment pumps, or batch production—out of the identified 15‑minute windows. Even a 5‑% reduction in consumption during the four peaks can lower the 4CP line by several thousand dollars for a 10‑MW facility. UPG’s Energy Health Check routinely audits a client’s bill and TDSP delivery‑charge structure, uncovering hidden load‑shifting opportunities that have saved our 8,000+ customers an average of $3.2 M annually.

Predictive Analytics and UPG Services

Because the four peak intervals are set well in advance (typically by early May), businesses can use forecasting tools to predict when the peaks will occur and plan operations accordingly. UPG offers a proprietary 4CP prediction service that overlays weather forecasts, ERCOT load trends, and historical plant data to generate a daily “peak‑avoidance window.” Clients that adopt the service have reported up to a 27% reduction in 4CP spend, aligning with our broader portfolio‑wide spend‑reduction benchmark.

Demand Response and Curtailed Operations

Participating in ERCOT’s ancillary services markets—such as the Emergency Response Service (ERS) or the Capacity Market—allows a site to receive a payment for voluntarily reducing load during system emergencies. While ERS events are not the same as the 4CP intervals, the operational discipline required to respond quickly often translates into better control during the four summer peaks. Moreover, some REPs (Retail Electric Providers) bundle demand‑response credits directly into the 4CP calculation, effectively offsetting a portion of the charge.

When 4CP Management Isn’t Worth It

Not every facility benefits from aggressive 4CP reduction. If a plant’s load profile is flat (e.g., data centers with constant power draw) or if the critical process cannot be interrupted without costly downtime, the effort to shave a few megawatts may not justify the labor and technology expense. Likewise, businesses with very low electricity rates—such as those on a fixed‑rate contract below $0.07/kWh—may see a marginal dollar impact from 4CP, making the ROI of sophisticated analytics questionable. In those cases, focusing on broader procurement strategies—like locking in a fixed‑rate contract through UPG’s supplier panel—often yields a higher overall savings percentage.

Bottom line

4CP charges are a transparent, usage‑based transmission cost that can be managed through targeted load shifting, accurate forecasting, and strategic demand‑response participation. Texas businesses that partner with an experienced consultant—leveraging UPG’s 25 + years of market expertise, free Energy Health Check, and access to a 30‑plus‑supplier panel—can achieve up to a 27% reduction in 4CP spend, contributing to the average $3.2 M saved annually across our client base. However, the operational burden must be weighed against the potential savings; for flat‑load or mission‑critical facilities, a broader procurement approach may be the smarter path.