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

The core truth about 4CP

Four Coincident Peak (4CP) charges are a transmission cost allocation that ERCOT applies to every commercial and industrial (C&I) customer in Texas. The charge is calculated from a site’s demand during the four highest 15‑minute intervals in each summer month (June‑September). If you can reduce your demand during those specific intervals, you lower the next year’s transmission bill; if you cannot, the charge will simply ride on your overall demand profile.

For most Texas businesses, 4CP can represent $10‑$30 per kW per month, which translates into a 5‑15% swing in total electricity spend. United Power Group (UPG) has helped more than 8,000 customers shave an average of $3.2 M in annual costs, and our 30‑plus supplier panel can deliver up to a 27% spend reduction when 4CP is managed alongside contract strategy.

Understanding ERCOT’s four summer peaks

How the peaks are identified

ERCOT runs a 15‑minute nodal market that records the system‑wide demand at each interval. At the end of each summer month, ERCOT extracts the four highest demand intervals across the entire ERCOT footprint. Those intervals become the “coincident peaks” for that month. The same four intervals are then used to allocate each customer’s share of the transmission cost for the next year’s billing cycle.

Why the peaks matter for C&I customers

Transmission costs are a fixed component of the TDSP (Transmission and Distribution Service Provider) bill, but the 4CP portion varies with how much you draw during the identified intervals. A plant that peaks at 1,200 kW during a 4CP interval will pay a larger share than a similar plant that only hits 800 kW at the same time.

How 4CP charges are calculated

1. Identify the four intervals – ERCOT publishes the timestamps (e.g., June 15 13:45‑14:00).
2. Measure site demand – Your meter data, typically in 15‑minute increments, is matched to those timestamps.
3. Calculate the site’s peak contribution – The average demand across the four intervals (in kW) becomes your “4CP demand.”
4. Apply the transmission rate – PUCT‑approved transmission rates (cents/kWh) are multiplied by the 4CP demand and the number of months in the billing year.
5. Add to the TDSP bill – The resulting dollar amount appears as a separate line item on your monthly invoice.

Because the charge is based on a handful of intervals, a small shift in load can produce a disproportionate cost impact.

Strategies to reduce 4CP charges

1. Demand shifting and load flattening

Move discretionary processes (e.g., packaging, HVAC pre‑cooling, water‑treatment cycles) out of the identified peak windows. Even a 5‑10% reduction in demand during those 15‑minute slices can cut the 4CP component by 10‑20%.

2. Improve load factor

A higher load factor (average demand ÷ peak demand) spreads usage more evenly across the day. Installing energy‑storage systems or using on‑site generation (solar + battery) to shave the peaks can raise the load factor from 0.55 to 0.70, directly lowering the 4CP allocation.

3. Predictive analytics and 4CP forecasting

UPG’s proprietary 4CP prediction service ingests weather forecasts, production schedules, and historical demand to flag likely peak intervals weeks in advance. Customers can then issue work orders or adjust set‑points proactively. Our clients typically see a 3‑5 kW reduction per peak interval, which translates into $2,000‑$5,000 annual savings per site.

4. Contractual hedging with block & index structures

While 4CP is a transmission charge, the underlying energy price can be hedged. Fixed‑rate contracts lock the energy component, allowing you to focus purely on demand management. In many cases, a combined strategy of a fixed‑rate contract and a 4CP reduction plan yields the highest overall spend reduction—often approaching the 27% ceiling we have achieved for some clients.

5. Curtailment during extreme peaks

In rare cases, a brief, controlled curtailment (e.g., shedding 5‑10% load for a 15‑minute window) can be cheaper than paying the 4CP charge. This tactic is most viable for facilities with flexible processes and where the marginal cost of lost production is lower than the 4CP rate.

When chasing 4CP isn’t worth it

Not every site benefits from aggressive 4CP management. Consider the following thresholds:

• High baseline load factor (>0.80) – Your demand is already flat; the marginal gain from further flattening is minimal.
• Critical processes locked to specific times – If shifting load would disrupt production or quality, the operational risk outweighs the dollar savings.
• Small 4CP contribution (<$500/month) – For low‑consumption sites, the effort of monitoring and adjusting may exceed the financial benefit. In these scenarios, UPG recommends focusing on broader spend optimization—such as renegotiating REPs, leveraging our 30‑plus supplier panel, or pursuing a free Energy Health Check to uncover higher‑impact opportunities.

Bottom line

4CP charges are a predictable, yet highly concentrated transmission cost that hinges on a facility’s demand during four specific summer intervals. By flattening demand, using predictive tools, and evaluating the cost‑benefit trade‑off, Texas C&I customers can trim a meaningful slice of their electricity bill. United Power Group’s 25 + years of Texas market expertise, free Energy Health Check, and access to a top‑tier supplier panel make it straightforward to identify whether a 4CP reduction strategy will deliver real value for your operation.