For commercial, industrial, and large institutional electricity consumers in Texas, electric invoices are rarely dictated simply by total kilowatt-hours (kWh) consumed. Instead, a massive line item—often representing 30% to over 50% of the entire annual electric bill—is governed by a regulatory transmission tariff known as ERCOT 4CP (Four Coincident Peak).
A business running heavy HVAC chillers, data centers, cold storage, or manufacturing equipment during four isolated 15-minute intervals in the summer will pay drastically higher transmission delivery fees every single month of the following calendar year.
ERCOT 4CP (Four Coincident Peak) is the regulatory allocation mechanism used by the Public Utility Commission of Texas (PUCT) to distribute the annual statewide cost of high-voltage transmission lines among transmission-level and secondary/primary commercial customers. 4CP measures a facility's average electric demand (in kW or kVA) during the single highest 15-minute system-wide peak interval in each of the four summer months: June, July, August, and September. This four-interval average establishes the customer's transmission billing determinant for all 12 billing cycles of the subsequent calendar year.
Understanding how 4CP is calculated, how transmission utilities bill it, and how automated peak curtailment programs operate is the single highest-ROI energy strategy available to commercial power consumers in Texas.
Why ERCOT 4CP Exists: Funding the High-Voltage Grid
Building and maintaining high-voltage transmission lines (138 kV and 345 kV towers, high-capacity transformers, and substation switchyards) across ERCOT requires billions of dollars in annual capital expenditures. Regulated Transmission and Distribution Utilities (TDUs)—including Oncor, CenterPoint, AEP Texas, and TNMP—are legally entitled to recover these capital costs through PUCT-approved transmission tariffs.
Rather than charging consumers a flat fee, the PUCT established the Coincident Peak methodology under 16 Texas Administrative Code (TAC) §25.192. The operational logic is straightforward:
- System Stress Alignment: Transmission infrastructure is engineered to prevent blackouts during the few hours each year when statewide air conditioning and industrial demand push the grid to its absolute limits.
- Cost Causation: Those consumers who draw significant electric power during ERCOT's four highest peak intervals are directly responsible for the need to build wider, more expensive transmission corridors.
- Behavioral Incentive: By tying 12 months of future delivery charges to just four 15-minute intervals, the state creates an immense financial incentive for large power users to voluntarily curtail power during grid emergencies.
How ERCOT Identifies the 4CP Intervals
The four coincident peak intervals are determined retrospectively by ERCOT market settlement systems. ERCOT evaluates the four peak summer months:
- June 4CP Interval: The single 15-minute ERCOT settlement interval with the highest total system demand during June (usually between 4:00 PM and 6:00 PM CDT).
- July 4CP Interval: The single 15-minute interval with the highest system demand in July (typically between 4:30 PM and 6:30 PM CDT).
- August 4CP Interval: The single 15-minute interval with the highest system demand in August (often between 4:45 PM and 7:00 PM CDT).
- September 4CP Interval: The single 15-minute interval with the highest system demand in September (often between 4:15 PM and 6:15 PM CDT during late-season heat waves).
None of these intervals are announced in advance. ERCOT engineers analyze grid telemetry after the end of each month, identify the specific 15-minute timestamp where total ERCOT load peaked, and publish the official settlement interval to market participants.
The 4CP Math: How Your Transmission Factor Is Calculated
To calculate your facility's 4CP allocation for the upcoming calendar year, your utility records your exact meter demand (in kW or kVA) during those exact four 15-minute settlement intervals:
$$\text{4CP Demand Factor} = \frac{\text{Demand}{\text{June}} + \text{Demand}{\text{July}} + \text{Demand}{\text{August}} + \text{Demand}{\text{September}}}{4}$$
The 12-Month Compounding Penalty
Once your 4CP average is established, it is locked in for the entire next calendar year (January 1 through December 31). Every month, your retail electric provider passes through your TDU's PUCT-approved transmission charge multiplied by that fixed 4CP factor.
In TDUs like CenterPoint or Oncor, commercial transmission charges commonly range between $4.50 and $7.50 per kW/kVA per month.
| Facility Operating Profile | June Peak Demand | July Peak Demand | August Peak Demand | September Peak Demand | Resulting 4CP Demand Factor | Monthly Transmission Cost (@ $6.00/kW) | Annual 4CP Transmission Expense |
|---|---|---|---|---|---|---|---|
| Unmanaged 1 MW Facility | 1,000 kW | 1,020 kW | 1,050 kW | 970 kW | 1,010 kW | $6,060 / mo | $72,720 / yr |
| Active 50% Curtailment Facility | 500 kW | 510 kW | 525 kW | 485 kW | 505 kW | $3,030 / mo | $36,360 / yr |
| Full Islanding / Battery Discharge | 50 kW | 60 kW | 40 kW | 50 kW | 50 kW | $300 / mo | $3,600 / yr |
Notice the staggering disparity: by reducing facility demand for just one combined hour (four 15-minute intervals) across the entire summer, the actively managed facility saves $36,360 per year, while the facility utilizing battery energy storage or backup generation saves nearly $70,000 annually.
Who Is Subject to 4CP Charges in Texas?
Not every commercial electricity customer is billed on 4CP. Eligibility and tariff applicability depend on your service voltage class and peak historical demand:
Customers with Interval Data Recorders (IDR) or smart commercial meters recording 15-minute interval telemetry with peak loads over 700 kW to 1 MW are automatically evaluated under 4CP tariff schedules across Houston, Dallas, Fort Worth, and adjacent ERCOT regions.
4CP Prediction and Curtailment Strategies
Because missing a single 4CP event can increase your electric bill by tens of thousands of dollars for the following 12 months, commercial operations deploy sophisticated operational curtailment strategies:
1. 4CP Notification Protocols
Energy managers subscribe to automated ERCOT grid alert services that track temperature anomalies, industrial load forecasts, solar ramp-downs, and wholesale real-time Locational Marginal Prices (LMP). Typically, businesses receive:
- Day-Ahead Alerts: Forecasts flagging days with projected ERCOT system peaks above 80 GW to 85 GW.
- Same-Day Two-Hour Notices: Real-time dispatch alerts instructing operational teams to initiate load shedding between 3:30 PM and 6:30 PM.
- All-Clear Confirmations: Verification that peak grid demand has peaked and begun its evening descent.
2. Physical Operational Curtailment
Facilities implement staged load reduction sequences during high-probability 4CP windows:
- Pre-Cooling Facilities: Chillers run aggressively from 11:00 AM to 2:30 PM, dropping building temperatures by 2 to 3 degrees Fahrenheit. At 3:30 PM, chillers cycle down or run at 30% baseline while indoor thermal mass maintains comfortable occupant temperatures.
- Staging Batch Manufacturing: Heavy electric furnaces, industrial pumps, and packaging machinery are scheduled for early morning or night shifts rather than late summer afternoons.
- Variable Frequency Drives (VFDs): Non-essential air handling units, exhaust fans, and water circulating pumps are throttled back to minimum allowable speeds.
3. Behind-the-Meter Battery Energy Storage (BESS)
Modern commercial operations increasingly install lithium-iron-phosphate (LFP) battery storage systems. When a 4CP peak alert is broadcast, the BESS automatically discharges power directly into the facility's main distribution panel. To the utility meter, the facility's net demand appears near zero, completely wiping out 4CP transmission determinants without disrupting building operations or factory output.
Contract Structures: Unbundled vs. Bundled Commercial Plans
When shopping for commercial electricity contracts, how your Retail Electric Provider treats 4CP determines whether your operational efforts pay off:
- Unbundled / Pass-Through Commercial Contracts: The REP bills energy charges at fixed wholesale or retail rates, while passing through TDU delivery and transmission charges at literal cost. This contract type is essential for 4CP management. Every kilowatt shed during summer 4CP events translates directly to 100% of the transmission cost savings on your utility bills.
- Bundled / Fixed-All-Inclusive Commercial Contracts: The REP quotes a single flat rate per kWh that includes estimated transmission and delivery costs based on your historical load profile. On bundled plans, if your team curtails power during 4CP peaks, the retail provider captures the financial windfall rather than your organization.
Before signing a commercial electricity agreement, review our guide on how to read an Electricity Facts Label (EFL) and consult our analysis of commercial electricity rate structures.
Compare Commercial Electricity Rates on GetElectricity
Whether you manage an industrial manufacturing plant, cold storage logistics warehouse, or multi-tenant commercial office portfolio across Texas, energy procurement requires rigorous tariff analysis.
GetElectricity connects directly to your Smart Meter Texas telemetry, analyzes your historical 15-minute interval demand data, and models custom electricity contracts across leading commercial Texas providers. We verify whether unbundled 4CP pass-through structures or index-plus-adder strategies maximize your operational savings.
Enter your facility ZIP code on GetElectricity to request a dedicated commercial rate and demand charge audit from our Texas commercial energy advisory team.
Related reading:
- Review your utility's specific delivery charges with our detailed breakdown of Oncor TDU charges and CenterPoint TDU delivery charges.
- Avoid contract traps with our guide on commercial contract renewals and expirations.
Frequently Asked Questions
What is the difference between 4CP and NCP demand charges?
Non-Coincident Peak (NCP) demand charges are billed by your local utility based on your individual facility's highest 15-minute electricity peak during your monthly billing cycle, regardless of what the rest of the Texas electric grid is doing. In contrast, 4CP (Four Coincident Peak) transmission charges are determined exclusively by your facility's demand during the single 15-minute interval when the entire ERCOT grid reaches its absolute highest peak in each of the four summer months (June through September).
When do ERCOT 4CP peaks usually happen?
ERCOT 4CP peaks almost universally occur on hot summer weekdays between late June and mid-September. The peak 15-minute interval typically falls between 4:30 PM and 6:30 PM Central Time, when high commercial air conditioning demand coincides with residential return-from-work load and diminishing solar generation output across West Texas.
Can a business save money if it only curtails during 3 out of 4 peaks?
Yes, but the financial return is diluted. Because your annual 4CP transmission factor is calculated as the mathematical average of all four summer peak intervals, successfully dropping your load to zero in three intervals while running at full 1,000 kW capacity during the fourth still results in a 250 kW billing determinant ( (0 + 0 + 0 + 1,000) / 4 ). While saving 75% of your transmission cost is substantial, hitting all four events delivers 100% elimination.