Your Guide to Managing 4CP Demand Charges in Texas

Texas' 4CP demand charges are complex and costly. What can you do to manage them ahead of the summer season?

If you’re a building owner or operator in Texas, it’s likely you understand that there’s significant money on the line when it comes to managing demand charges. But predicting when those peaks might occur and how to lower your charges can be tricky. Let’s break it down. 

What is 4CP?

4CP is the name given to “Coincident Peak Demand Charges” in Texas. Electricity bills for commercial properties often include demand charges, some of which in Texas are based on what are called “coincident peaks,” or system-wide peaks, which occur when electricity demand reaches its highest level across a specific region or system. Coincident peaks in ERCOT, the grid operator in Texas, represent the highest electricity demand in each summer month, from June 1 to September 30. There are four such peaks each year, hence the name 4CP.

How do 4CP charges work?

4CP charges are calculated based on your building’s demand at the time of the system peak for each of the four summer months, June through September. These peaks typically occur during hot summer afternoons  when demand for electricity is highest (think: summer heatwaves!). The system peak determines the timing of the 4CP event. Your building’s demand during the event determines your 4CP demand charge for the following calendar year.  

Who is affected by 4CP charges?

Not every building pays 4CP demand charges. These charges typically only affect customers of the large electricity distributors in Texas, such as Oncor, CenterPoint, or AEP. Further, they mostly apply to larger buildings, although the details will vary by utility. For example, Oncor customers usually only pay 4CP charges if they have at least 700 kW of demand.

How does 4CP impact building owners/managers?

Understanding and managing 4CP is crucial because it usually makes up more than 10% of your energy costs. Higher demand during these peak periods leads to increased charges on your utility bills, potentially resulting in significant expenses for your property. As an example, reducing an average of 100 kW during the 4CP events could yield more than $6,000 in annual cost-savings for Oncor customers.

What action can you take to get ahead of it?

Being alerted to potential 4CP windows is critical to managing this unpredictable cost. Gridium’s performance analytics platform leverages machine learning and artificial intelligence (AI) models to forecast electricity load demand on each day to provide accurate predictions for our customers. 

4CP periods can be predicted based on weather forecasts and other factors, usually occurring on weekdays between 4-6pm.  Once a potential 4CP period is forecast, building owners and operators are encouraged to implement strategies to reduce electricity usage during peak demand periods to mitigate the impact of the charges. Reduction measures could include shifting HVAC/equipment schedules or making BMS adjustments. 

How can Gridium help?

At Gridium, we specialize in helping building owners and operators navigate complex energy management challenges like 4CP. Our advanced analytics and energy management solutions provide actionable insights into your property’s energy usage patterns, allowing you to identify opportunities for optimization and cost savings.

Ahead of this year’s 4CP season, we’re pleased to announce new 4CP alerting capabilities in our platform to help Texas building owners and operations better manage these costs.

How will it work?

Here’s what mitigating 4CP demand charges will look like with help from Gridium:

1. Establish your curtailment strategy.
   1. Identify load reduction measures that won’t negatively impact building operations on hot, late weekday afternoons. For example, you could consider:
   2. Pre-cooling the building and then attempting to coast through the peak period with chillers partly or entirely turned off.
   3. Limiting unnecessary sources of electricity use such as common area lighting, outdoor lighting, fountains and other water features, etc.
   4. Buildings that have a battery storage system should make sure the discharge cycle is timed to the projected system peak.
2. Receive 4CP notification from Gridium.
   Customers will receive two email notifications ahead of a potential coincident peak day; 1 day ahead and 1 day-of.  (Recipients can expect to receive about one email per week over the course of the four month period.)
3. Take action. Enact your curtailment plan to mitigate those peak charges!
4. Verify your reduction. To ensure your curtailment strategy went according to plan, simply log in to Gridium’s analytics platform to see the reductions. Use that data to coordinate with your building team to make adjustments as necessary ahead of the next 4CP period!

Gridium’s operator-friendly technology, supported by a deep bench of energy experts, is designed to help building teams proactively manage your building’s energy consumption, reduce 4CP charges, and ultimately, improve your bottom line ahead of 2025.

We’d love to help you mitigate 4CP charges ahead of this summer. Contact us for a free trial of our analytics platform today.