ERCOT 4CP, Explained

ERCOT 4CP, the four coincident peaks, are the single 15-minute intervals of highest total grid demand in each of June, July, August and September. For a Texas facility with an interval data recorder meter, its average demand across those four intervals becomes its 4CP value, and that value sets its share of the state's transmission cost of service for the following calendar year. A facility that happens to be running hard during those four intervals pays for it for twelve months; one that curtails for an hour on the right afternoons can cut a six-figure line item without changing anything else about how it operates.

This is the mechanism most new entrants to Texas, data center operators above all, find out about after the first full summer rather than before it. It is also the reason a Texas bill can look very different from a PJM bill for the same load. PJM allocates capacity cost by the grid's peak; ERCOT has no capacity market, so it allocates transmission cost the same way, and 4CP is the measurement.

How 4CP is measured

Every month from June through September, ERCOT identifies the 15-minute settlement interval in which total system demand was highest. Those four intervals are the coincident peaks; they almost always fall on a weekday between about 3 pm and 6 pm, and usually on a day the forecast flagged as hot. After September ends, ERCOT publishes the four timestamps.

For each facility with an IDR meter, the transmission and distribution utility (Oncor, CenterPoint, AEP Texas, TNMP) looks up the facility's average kW in each of those four intervals and averages the four numbers. That is the facility's 4CP, in kW. From the following January, the utility multiplies the 4CP by its approved transmission rate, in dollars per kW per month, and bills it every month for the year.

Three things follow from the mechanics:

• It is coincident, not non-coincident. The facility's own peak does not matter. What matters is what it was drawing at the exact moment the grid peaked. A plant that peaks at 7 am and idles by 3 pm has a low 4CP regardless of its nameplate.
• It is set once a year. The four summer intervals of 2026 set transmission cost for all of 2027. There is no monthly reset and no ratchet; there is just one measurement and twelve bills.
• It is in delivery. Switching retail electric providers does not change it. Only the facility's load during those four intervals does.

Who it applies to

4CP transmission billing applies to customers on IDR meters, which in practice means larger commercial and industrial accounts; the threshold is set by the utility's tariff and is roughly 700 kW of demand, with some utilities applying it to smaller loads that request an IDR. Smaller commercial customers on non-IDR meters are billed transmission on their own non-coincident peak or on energy, and 4CP does not apply to them directly, though their retail provider's costs still reflect it.

The loads that carry the largest 4CP exposure are the ones that run flat through summer afternoons: data centers, cold storage, continuous-process plants, large hospitals and campuses. The loads with the easiest 4CP wins are the ones with some flexibility in those same hours: batch manufacturing, warehousing, water pumping, facilities with on-site generation or storage.

What it costs

Transmission rates differ by utility and change annually with rate cases, but the arithmetic is simple. Take a 5 MW data center with a 4CP of 4,800 kW, because it was running near full load on all four afternoons. If the applicable transmission rate is $5 per kW per month, the 4CP charge is 4,800 multiplied by $5 multiplied by 12, or $288,000 for the year. If the same facility had shifted to on-site generation or battery for the single hour around each of the four peaks and recorded an average of 1,200 kW, the charge would be $72,000. That is $216,000 a year for four hours of curtailment. (The rate is illustrative; the structure of the saving is not.)

Transmission rates in ERCOT have risen steadily as the state builds lines to serve load growth in the Permian, along the I-35 corridor and around the new data center clusters, so the value of a low 4CP has been rising with them. Our note on Texas data center energy costs puts 4CP alongside the other components of a large Texas bill.

How facilities reduce it

The problem is that ERCOT does not announce the peak in advance. The four intervals are known only after each month ends. Managing 4CP is therefore a forecasting exercise: predicting which afternoons are likely to contain the monthly peak and curtailing during a window around the likely interval.

1. Subscribe to a 4CP alert service. Several retail providers and third parties issue alerts on days where their forecast puts the probability of a monthly peak above a threshold. A typical summer produces ten to twenty alert days to capture four actual peaks, so the cost of responding to alerts has to be weighed against the saving.
2. Decide what can move for an hour. Pre-cool the building and let HVAC coast through the window. Pause a batch process. Shift a compressor cycle. Run on-site generation or discharge a battery. Data centers usually cannot shed IT load, which is why the ones that manage 4CP do it with generation, storage or by pre-cooling and letting chillers coast.
3. Automate the response. A building management system that receives the alert and executes the curtailment without a person deciding each time is far more reliable than a phone tree. The peak interval is fifteen minutes; a late response misses it.
4. Price it into the supply contract. Some retail providers offer 4CP-responsive products that share the transmission saving. Whether that is better than managing it independently depends on how much the facility can actually curtail, and a broker should quote both.

4CP and demand response are not the same thing

ERCOT also runs emergency and economic demand response programs, in which a facility is paid to curtail when the grid operator calls an event. Those events and the 4CP intervals sometimes coincide, because both happen on the hottest afternoons, but they are different mechanisms with different payments. A facility set up to respond to 4CP alerts is usually well placed to enroll in demand response as well, and the combined value is what makes a curtailment plan worth building. For a facility in PJM territory the equivalent concept is the capacity tag, which our note on demand and capacity charges explains.

What to do before next summer

Pull the facility's interval data for last June through September and look up ERCOT's published 4CP timestamps for the year. The facility's draw in those four intervals is its current 4CP and the basis of this year's transmission bills. Then ask what it could have been with an hour of curtailment on each of those four afternoons. The gap, multiplied by the utility's transmission rate, is the annual value of a 4CP plan, and for most large Texas loads it justifies the alert subscription, the automation and the operational planning many times over.