What is 4CP? (Four Coincident Peaks Explained)

Transmission costs are the fees paid to maintain and operate the high-voltage power lines that deliver electricity from generation plants to local distribution networks. In Texas, these costs are substantial—billions of dollars annually—and ERCOT must allocate them fairly across all commercial and industrial customers.

Rather than charging every business the same flat rate, ERCOT uses the 4CP method to allocate costs based on each customer's contribution to grid stress. The logic is straightforward: businesses that demand more electricity during the grid's peak stress periods should pay a larger share of the transmission infrastructure costs, since that infrastructure must be sized to handle peak demand.

Here's how it works: ERCOT identifies the four highest system-wide peak demand intervals during the summer months (June through September). These are the four 15-minute periods when total electricity demand across the entire ERCOT grid is highest. For each of these four intervals, ERCOT records your business's demand (measured in kilowatts, or kW).

Your 4CP contribution is calculated by averaging your demand during these four intervals. This average becomes your "4CP demand," which determines your share of transmission costs for the next 12 months. If your business had high demand during even one of these four intervals, it can significantly increase your transmission charges for an entire year.

The 4CP periods occur during the four highest peak demand hours on the ERCOT grid between June 1 and September 30 each year. These peaks almost always happen on hot weekday afternoons when air conditioning demand is at its highest across Texas.

The exact dates and times of the 4CP intervals are not announced until after the summer season ends, typically in October. This creates a challenge for businesses: you don't know which specific hours will be the 4CP intervals, so you must manage your demand throughout the entire June-September period to minimize risk.

However, patterns are predictable. The 4CP intervals almost always occur during extreme heat events when the entire state is running air conditioning at maximum capacity. By monitoring weather forecasts and ERCOT grid conditions, businesses can identify high-risk days and take proactive steps to reduce demand.

Many energy management companies and electricity brokers offer 4CP alert services that notify businesses when a potential 4CP interval is approaching, giving them time to implement demand reduction strategies. These alerts are based on real-time grid data, weather forecasts, and historical patterns.

Reducing your 4CP charges requires strategic demand management during the June-September window. The goal is to lower your electricity demand (kW) during the hours most likely to become 4CP intervals—typically hot weekday afternoons between 3 PM and 7 PM.

1. Shift High-Energy Operations to Off-Peak Hours

If your business has flexibility in scheduling energy-intensive operations, shift them to mornings (before 2 PM) or evenings (after 8 PM) during the summer months. Manufacturing processes, equipment testing, large-scale data processing, and other high-demand activities can often be rescheduled to avoid peak hours without disrupting operations.

2. Pre-Cool Buildings Before Peak Hours

For businesses with significant cooling loads (offices, retail stores, warehouses), pre-cooling your facility in the morning allows you to raise thermostat settings during peak afternoon hours. By cooling the building to 68-70°F before 2 PM, you can reduce HVAC demand during the critical 3-7 PM window while maintaining comfortable temperatures.

3. Cycle Equipment to Avoid Simultaneous Operation

Many businesses run multiple pieces of high-demand equipment simultaneously during peak hours. By staggering equipment operation—running one machine at a time instead of all at once—you can significantly reduce your peak demand without reducing total productivity. This is especially effective for operations with multiple HVAC units, compressors, or production lines.

4. Install Demand Management Systems

Automated demand management systems monitor your real-time electricity usage and automatically reduce load when demand approaches dangerous levels. These systems can temporarily shut down non-critical equipment, adjust HVAC settings, or shift operations to backup power during potential 4CP intervals. The upfront investment often pays for itself within 1-2 years through 4CP savings.

5. Subscribe to 4CP Alert Services

Many electricity brokers and energy management companies offer free or low-cost 4CP alert services. These services send notifications (email, text, or phone call) when grid conditions suggest a potential 4CP interval is approaching, giving you 1-2 hours to implement demand reduction strategies. This proactive approach is one of the most cost-effective ways to manage 4CP risk.

To illustrate how 4CP charges work and their financial impact, let's examine a real-world scenario for a mid-sized manufacturing facility in Dallas.

Scenario: Dallas Manufacturing Facility

• Facility Size: 75,000 sq ft manufacturing plant
• Typical Demand: 300 kW during normal operations
• Peak Demand (Summer Afternoons): 450 kW when all equipment and HVAC run simultaneously
• Transmission Cost Rate: $5.00 per kW per month (typical Oncor rate)

Without 4CP Management:

During the summer, the facility operates at full capacity during peak afternoon hours. On three of the four 4CP days, their demand hits 450 kW. On one day, they had slightly lower demand at 420 kW due to a production delay.

4CP Calculation: (450 + 450 + 450 + 420) / 4 = 442.5 kW average
Annual Transmission Cost: 442.5 kW × $5.00/kW/month × 12 months = $26,550

With 4CP Management:

The facility implements a 4CP reduction strategy: they pre-cool the building in the morning, stagger equipment operation during peak hours, and subscribe to a 4CP alert service. When alerts are issued, they temporarily shut down non-critical equipment and raise thermostat settings by 2-3 degrees.

During the four 4CP intervals, their demand is reduced to 320 kW, 310 kW, 330 kW, and 315 kW.

4CP Calculation: (320 + 310 + 330 + 315) / 4 = 318.75 kW average
Annual Transmission Cost: 318.75 kW × $5.00/kW/month × 12 months = $19,125

Annual Savings:

$26,550 - $19,125 = $7,425 saved annually

By reducing their average 4CP demand by 123.75 kW (28% reduction), the facility saves over $7,400 per year in transmission charges. These savings continue for 12 months based on just four hours of demand management during the summer.