Texas Demand Charges and ERCOT 4CP: A Guide for Facility Managers

Key takeaways

• Larger Texas sites pay delivery charges on demand (kW or kVA), not just energy (kWh).
• CenterPoint and Oncor bill transmission on 4CP once a site has reached about 700 kVA or 700 kW of monthly peak demand.
• Your demand in four 15-minute summer intervals sets a transmission charge for the following 12 months.
• As of October 2026 the PUCT has proposed, but not adopted, replacing 4CP with a 12-month, 30-minute 12CP method.
• Cooling is the main weather-driven load at peak, so lower kW per ton cuts both NCP and 4CP demand.

For many Texas commercial and industrial sites, a summer afternoon decides a large share of the next year's electric bill. Two parts of the delivery bill are driven by demand, measured in kilowatts (kW) or kilovolt-amperes (kVA), rather than by the energy you use over the month. One of them, the ERCOT four coincident peak (4CP) transmission charge, is set by your demand in just four 15-minute intervals each summer. This guide explains how energy and demand charges differ, how utility demand charges work, how 4CP works and who it applies to, how the rules are changing, and why the cooling plant matters so much. Tariff details are as of October 2026.

Energy charges and demand charges

A commercial bill in the competitive parts of ERCOT combines two sets of charges:

• Energy (kWh). What your retail electric provider (REP) charges for the electricity itself, usually priced per kWh under your supply contract.
• Delivery. Charges from the transmission and distribution utility (TDU) that owns the wires in your area, such as CenterPoint Energy Houston Electric or Oncor. These are set in tariffs approved by the Public Utility Commission of Texas (PUCT) and are billed through your REP. For larger customers, most of them are based on demand.

Demand is the rate at which you draw power, averaged over a short interval, usually 15 minutes. Two sites can use the same kWh in a month and pay very different delivery bills, because one runs evenly and the other spikes on hot afternoons. For the wider picture of what drives cooling costs, see why cooling costs keep rising.

How TDU demand charges work

TDU tariffs bill larger non-residential customers on two kinds of demand:

• NCP demand (non-coincident peak): your highest 15-minute demand in the billing month, whenever it happens. This drives the distribution charges.
• 4CP demand: your average demand during ERCOT's four summer system peaks. For larger customers, this drives the transmission charges.

Two current examples, as of October 2026:

These rates change. The TCRF is updated periodically as wholesale transmission costs change; Oncor's tariff lists dozens of past TCRF revisions. Use the current tariff sheet, not this table, for any budget.

Two details catch people out. First, CenterPoint bills demand in kVA, not kW. kVA includes the effect of power factor, so a site with a poor power factor pays on more kVA than its kW. Second, some schedules include a ratchet: CenterPoint's primary-voltage schedule, for example, bills distribution on the higher of the current month's NCP or 80% of the highest NCP in the preceding 11 months, so a single high summer month can set a floor for most of a year.

What 4CP is

ERCOT recovers the cost of the high-voltage transmission network from distribution utilities in proportion to their share of the summer peak. Under the PUCT's rule, 16 TAC §25.192, the wholesale transmission rate is based on the average of ERCOT coincident peak demand for June, July, August and September: the "4CP." Each month's coincident peak is the single 15-minute interval when total ERCOT demand was highest. ERCOT files the results with the PUCT after each summer. For 2024, ERCOT reported the 4CP dates as June 30, July 1, August 20 and September 20.

The TDUs pass these costs to retail customers through the TCRF. For larger customers, the TCRF is billed on that customer's own demand during the same four intervals.

Who is billed on 4CP

Each TDU's tariff sets the threshold. As of October 2026:

• CenterPoint applies its 4CP-based charges to Secondary Service customers "who have established an NCP demand greater than 700 kVA in any previous billing month," and to customers already billed on 4CP, whatever kind of meter they have. These are the rates labeled "IDR," after the interval data recorder meters larger sites use.
• Oncor bills TCRF on 4CP for any premises "that has established an NCP kW of at least 700 kW in any previous billing month," and for customers already billed that way.

Other TDUs, such as AEP Texas and TNMP, have their own provisions. Ask your REP or TDU which basis your account uses.

For a 4CP-billed account, the tariffs define your 4CP demand as the average of your 15-minute demand at the time of each monthly ERCOT system peak in June through September of the previous calendar year. That value is then fixed for 12 months: from January 1 at Oncor and from the February billing month at CenterPoint. Customers without enough history are billed on NCP or an estimate.

The result is a long lag. What your site draws during four 15-minute windows in summer 2026 sets a transmission charge that runs on every bill through 2027. Reductions you make now first show up in charges based on summer 2027 peaks, if the 4CP method is still in place then.

The rules are changing

Senate Bill 6, passed by the Texas Legislature in 2025, required the PUCT to review how wholesale transmission costs are assigned and to amend its rules by December 31, 2026. As of October 2026:

• PUCT staff opened Project No. 58484 to evaluate transmission cost recovery and issued a draft report on March 16, 2026. Its findings included that the summer-only 4CP window misses winter scarcity events and that some large loads cut demand during likely peaks to avoid charges without reducing the costs they cause.
• In Project No. 58000, the PUCT proposed amendments to §25.192 and §25.193, published in the Texas Register on July 24, 2026, that would replace 4CP with a 12 coincident peak (12CP) method. Each 12CP interval would be the ERCOT system's peak 30-minute interval in each calendar month, from October through September. Comments were due August 11, 2026.
• The proposal also includes provisions aimed at large loads, such as minimum billing demand.

As of October 2026 the rule was proposed, not final, and the published text leaves the timing of the change to later proceedings. TDU retail tariffs would then need to follow. If a 12CP method is adopted, peaks in every month would count, not just summer ones. Check the PUCT project pages or ask your REP before you build 4CP savings into a multi-year forecast.

Why cooling drives the peaks

ERCOT's summer peaks fall on the hottest late afternoons and early evenings. The U.S. Energy Information Administration reported that ERCOT's hourly peak load reached a record 91.1 GW on July 22, 2026, at 6:00 p.m. Central, during a heat wave. Analysts at Grid Status describe the traditional high-load window as about 5 to 7 p.m., with solar and battery storage now shifting which interval ends up as the peak.

Those are the same hours when a building's cooling plant works hardest. Outdoor temperatures are near their daily high, condensers reject heat into hot air, and the building has absorbed heat all day. For many commercial sites, cooling is the largest load that rises and falls with the weather, which makes it the main lever on both monthly NCP and summer 4CP demand. Our guide to hotter summers and cooling load covers the climate side.

Cooling plant power is roughly the cooling load multiplied by efficiency:

Cooling kW = tons of cooling delivered × kW per ton

On a peak afternoon the tons are set by the weather and the building. The kW per ton is set by the equipment and its condition. A plant that needs less power per ton draws fewer kW at exactly the moments that set NCP and 4CP demand, without anyone having to predict the peak or shut anything off. Equipment that has lost capacity tends to do the reverse: it runs flat out through the afternoon, and units that used to cycle start running at the same time. See kW per ton, EER and COP explained for the metrics.

Many large sites also try to cut load during likely 4CP intervals, using alerts, generators or curtailment. That can lower charges, but it depends on forecasting the peak and on being able to shed load without harming operations. Efficiency gains apply automatically, every afternoon, and they also reduce kWh. The two approaches work well together.

Worked example (illustrative numbers)

All figures below are hypothetical, chosen only to show the math. They are not a prediction for any site or product.

A Houston facility takes Secondary Service from CenterPoint and is billed on 4CP. On peak summer afternoons its chiller plant delivers 400 tons at 0.80 kW per ton, or 320 kW. Suppose an efficiency project brings that to 0.72 kW per ton at the same load.

1. kW reduction at peak: 400 tons × (0.80 − 0.72) = 32 kW.
2. Convert to kVA (CenterPoint bills kVA). At an assumed power factor of 0.95: 32 ÷ 0.95 ≈ 33.7 kVA.
3. 4CP transmission charge: 33.7 kVA × $6.177655 per month × 12 months ≈ $2,497 per year, once the lower demand is captured in a 4CP year.
4. Distribution charges: 33.7 kVA × ($4.893378 + $1.008963) ≈ $199 per month in months when the cooling plant sets the site's NCP. Over five summer months, about $994.
5. Demand-related total: about $3,490 per year, before any kWh savings, which are calculated separately.

For scale, a site with 1,500 kVA of 4CP demand at the same TCRF rate would pay about $9,266 per month, or roughly $111,000 a year, in that one charge. Small kW changes at the right 15 minutes matter.

Three cautions. Rates change, often more than once a year, so use the current tariff. The 4CP part only counts if the cooling plant is running at full load during the ERCOT peak intervals, which it usually is on peak afternoons but should be confirmed with interval data. And if the 4CP method is replaced, the math will change. To add energy savings, use the method in how to calculate HVAC energy savings or the HVAC savings calculator.

How to find 4CP charges on your bill

Bill formats vary by REP. Some itemize TDU charges line by line; others combine them into one "delivery" or "TDU charges" line, or pass them through under a fixed-price contract. Look for:

• "Transmission cost recovery factor," "TCRF" or "transmission service charge"
• A billing quantity labeled "4CP kW" or "4CP kVA," which should be the same every month for 12 months
• "Distribution system charge" or "DCRF," billed on NCP or billing kW or kVA
• Your NCP demand for the month, often shown as "peak demand" or "billed demand"

If the bill does not show these, ask your REP for the TDU charge detail and your current 4CP value. Ask the REP or TDU for your 15-minute interval data as well, so you can see what your site was drawing during the ERCOT peak intervals.

A short checklist

1. Confirm your TDU, rate class, and whether you are billed on 4CP or NCP.
2. Record your current 4CP value and the TCRF rate applied to it.
3. Pull interval data for June through September and mark the ERCOT peak intervals.
4. Estimate how much of your demand at those intervals is cooling.
5. Check for ratchets on your distribution charges.
6. Watch the PUCT 12CP rulemaking before you count on 4CP savings beyond the next year.

Demand reductions can also earn utility incentives in Texas, which typically pay per kW of verified summer peak reduction. See Texas utility commercial incentives.

Where an efficiency treatment fits

Any measure that lowers kW per ton on peak afternoons reduces demand charges as well as energy use. CryogenX4 is one option for existing equipment: the company describes a one-time treatment that removes insulating oil film from heat-exchanger surfaces and reports energy savings of up to 30%, with results varying by equipment condition. If you consider it, measure kW at peak conditions as well as kWh in a pilot, so the demand effect is documented. See the pilot program guide.

Next step

Pull last summer's 15-minute interval data and your latest bill, and find your 4CP value and TCRF rate. Then estimate what a 5% to 10% change in cooling kW per ton at peak would be worth. If the number is meaningful, contact us to talk through how to measure it on your equipment.

Frequently asked questions

Does 4CP apply to small businesses?

Generally not. At CenterPoint and Oncor, 4CP billing applies once a site has reached a monthly peak of more than 700 kVA (CenterPoint) or at least 700 kW (Oncor), or was already billed that way. Smaller demand-billed accounts pay transmission charges on their monthly peak demand instead.

When are the 4CP intervals announced?

ERCOT confirms the four intervals from settlement data after each summer and files a report with the PUCT. Many REPs and analytics services send alerts on days a peak looks likely, but the official values come later.

If I cut demand this summer, when will my bill change?

Under the current tariffs, your 4CP value is based on the previous calendar year's June to September peaks and is reset in January (Oncor) or February (CenterPoint). A reduction during summer 2027 peaks would first affect bills from early 2028, if the 4CP method is still in use.

What is the difference between kW and kVA on my bill?

kW is real power. kVA is apparent power, which also reflects power factor. CenterPoint bills demand in kVA, so a site with a low power factor is billed on more kVA than its kW.

Will the 12CP proposal make summer peaks less important?

If adopted as proposed, peaks in every month would count, so summer would be one-third of the intervals instead of all of them. Hot-weather peaks would still matter, and efficiency gains would apply in every month the cooling plant runs at the peak.

Sources

1. 16 TAC §25.192, Transmission Service Rates (effective 12/20/22) — Public Utility Commission of Texas
2. Proposed Rules, Title 16 Economic Regulation: amendments to §25.192 and §25.193 (Project No. 58000), Texas Register, July 24, 2026 — Texas Secretary of State
3. Request for Comments on Texas PUCT Draft Report Regarding Transmission Cost Recovery in the ERCOT Region (March 30, 2026) — K&L Gates
4. Tariff for Retail Delivery Service (Revision 32, effective 5/18/26; Secondary Service sheet effective 2/26/26; Rider TCRF effective 9/1/26) — CenterPoint Energy Houston Electric
5. Tariff for Retail Delivery Service (effective June 1, 2026; Rider TCRF effective October 4, 2026) — Oncor Electric Delivery
6. ERCOT's Report on the 2024 4CP Coincident Peak Load in the ERCOT Region (Docket 55999) — ERCOT / Public Utility Commission of Texas
7. Hourly peak load in ERCOT set a new record, exceeding 91 GW on July 22 (August 3, 2026) — U.S. Energy Information Administration
8. Predicting Coincident Peaks in ERCOT's 4CP Program (August 14, 2024) — Grid Status
9. Texas PUC Staff File Proposed Rule To Replace 4CP Transmission Cost With 12CP; Minimum Billing Demand For Large Loads (June 12, 2026) — EnergyChoiceMatters.com