A few hours of high electricity demand on four summer afternoons determine how much your Texas business pays in transmission charges for the entire following year. This is the ERCOT four coincident peak process, commonly abbreviated 4CP, and it is one of the least-understood line items on a commercial electricity bill in Texas.
What the Four Coincident Peaks Are
Texas transmission utilities must fund the high-voltage network that moves electricity from generators to local utilities, and ERCOT, the grid operator for most of Texas, produces the data used to allocate those costs. A large portion of those costs is allocated based on load during four 15-minute settlement intervals, the single highest ERCOT system demand interval in each of June, July, August, and September of the prior year (16 Tex. Admin. Code §25.192; ERCOT Nodal Protocols, Section 9.17.1).
Those four hours are not announced in advance. ERCOT identifies them after the fact from settlement data, which nets out wholesale storage load, pinpointing the single highest 15-minute system demand interval in each of June, July, August, and September. In practice, all four peaks almost always fall on weekday afternoons in June, July, August, and September, typically between 3 p.m. and 7 p.m., when commercial air conditioning loads and industrial demand collide with residential cooling.
Your business's demand reading during each of those four 15-minute intervals is averaged together to produce your 4CP demand figure, expressed in kilowatts (kW). That figure is then multiplied by the PUCT-approved transmission rate in your local Transmission and Distribution Utility's (TDU) tariff, such as Oncor, CenterPoint, AEP Texas, or TNMP. That rate is applied to your 4CP demand on each monthly bill for the following calendar year, beginning in January.
How 4CP Charges Appear on a Commercial Bill
On most commercial electricity bills in Texas, transmission charges are bundled into the TDU delivery section rather than appearing as a single labeled line. Your retail electric provider (REP) collects these costs and passes them through. The specific line items vary by TDU but often appear as "transmission cost of service" or "TCRF" (Transmission Cost Recovery Factor).
For a mid-sized commercial customer, 4CP-related transmission costs can represent 10 to 20 percent of the total electricity bill, depending on the TDU territory and the customer's demand profile. Larger industrial users can see the share climb higher. Because the charge resets annually and reflects the prior summer's peaks, a business that happened to be running at full capacity during an exceptionally hot August afternoon will feel the financial consequence every month for the next year.
This is distinct from a standard demand charge, which is based on your own peak usage within a billing month. The 4CP charge is based on your demand during the grid's peak moments, not your personal monthly peak.
Why Small Businesses Often Overlook This Cost
Small businesses are at a structural disadvantage in 4CP management for two reasons. First, many small commercial accounts are billed on rate structures that do not separately itemize 4CP-derived charges, making the cost invisible. Second, the services that monitor ERCOT grid conditions and alert customers before a coincident peak hour arrives have historically been marketed toward large industrial users.
The result is that a bakery, a dental office, or a small manufacturing shop may be paying a meaningfully higher per-kWh effective rate than a comparable large customer that actively manages its 4CP exposure, simply because the large customer received a text alert and turned off non-essential equipment for 90 minutes on a Thursday in August.
How 4CP Avoidance Works in Practice
Avoiding or reducing a coincident peak charge does not require a capital investment. It requires demand reduction during the right hours. The general approach is:
Step 1: Get a 4CP alert service. Several REPs and third-party energy management firms offer 4CP monitoring as part of a commercial plan or as a standalone service. These services track ERCOT real-time load data and issue alerts, usually with 30 to 60 minutes of warning, when conditions suggest a coincident peak is likely forming. ERCOT publishes real-time grid conditions publicly at ercot.com, and a knowledgeable energy manager can monitor this data directly.
Step 2: Pre-cool the building. In the hour or two before a suspected peak, lower thermostat setpoints by 2 to 4 degrees Fahrenheit, then raise them during the peak window. The building's thermal mass retains enough cooling that occupant comfort is minimally affected, but HVAC demand drops sharply during the peak window.
Step 3: Defer discretionary loads. Delay equipment cycles that are not time-sensitive: dishwashers, laundry equipment, charging stations, compressors with storage capacity, and similar loads. Even modest reductions in demand during the right 15-minute interval translate into lower annual transmission costs.
Step 4: Document your actions. Your REP or TDU will use interval meter data to calculate your 4CP demand figure. Keeping an internal record of your curtailment actions helps verify that your meter reading aligns with expectations and gives you a baseline for improving performance next summer.
A business that reduces its demand by 20 kW during each of the four coincident peak hours can meaningfully cut its annual transmission allocation. The exact dollar savings depend on the TDU's transmission rate, which changes periodically through PUCT-approved tariff filings.
The Role of Your Retail Electric Provider
Not every commercial electricity plan passes 4CP charges through in the same way. Some fixed-rate commercial plans absorb transmission cost variability, meaning the REP takes on the 4CP risk and the business pays a stable rate regardless of its summer demand profile. Other plans pass transmission charges through at cost, which exposes the business directly to its 4CP performance.
Understanding which structure applies to your contract is essential before investing time in 4CP avoidance. If your plan absorbs transmission costs, the REP has already priced that risk into your per-kWh rate. If your plan passes costs through, active 4CP management has a direct and measurable payoff.
Before signing a commercial electricity contract, ask the REP explicitly: are transmission charges fixed or passed through? The answer shapes whether 4CP avoidance is worth the operational effort.
Timing and the Annual Reset
ERCOT determines the final four coincident peak intervals from settlement data and must file them with the PUCT no later than December 1 each year (16 Tex. Admin. Code §25.192(d)). At that point, the four hours are fixed, and there is nothing further to do until the following summer. The resulting transmission allocation then flows into bills beginning the following January and continues for 12 months.
This means the window for influencing your annual transmission cost is narrow: roughly June 1 through September 30. Outside of that window, monitoring ERCOT peak conditions for 4CP purposes is unnecessary.
Businesses that want to reduce their 4CP exposure should prepare before June arrives. That means selecting a plan structure that aligns with their strategy, establishing a relationship with an alert provider or energy manager, and briefing staff on curtailment procedures so that when an alert does arrive, the response is routine rather than improvised.
When 4CP Management Is Not Worth the Effort
For very small commercial accounts with low demand, the absolute dollar amount tied to 4CP charges may be modest enough that monitoring costs and staff attention outweigh the savings. A business with a peak demand below 20 kW and a pass-through transmission plan should calculate the potential savings in dollar terms, not just percentage terms, before committing to an active management program.
A qualified commercial energy broker or consultant can model the expected savings based on a business's historical interval meter data. Brokers and aggregators that join two or more customers together to purchase electricity must register with the PUCT under Substantive Rule 25.111 and disclose their agency and affiliate relationships with retail electric providers; a consultant advising a single customer across multiple sites need not register, so ask directly how the adviser is compensated (PUCT, Substantive Rule 25.111).
Understanding 4CP charges is the prerequisite to managing them. Once a business knows how the mechanism works and where the charges appear on its bill, the decision of whether and how to act becomes a straightforward cost-benefit question rather than a mystery buried in a line item.