Conquering Coincident Peak

How to master 4CP, 5CP, and other Coincident Peak programs

Large energy users don’t just pay for the electricity they consume. They also get charged based on when they use it.

One way some utilities do this is through Coincident Peak charges, which, if not managed carefully, can skyrocket industrial electric bills. Even 15 minutes of high demand at the wrong time can cause bills to jump for 12 more months.

Luckily, there is hope.

What Is Coincident Peak?

A Coincident Peak refers to a time when your facility’s power consumption coincides with the period of maximum monthly demand on the grid as a whole. Utilities and grid operators must maintain enough generation capacity to meet these peak demand periods, even if they occur just a few hours a year.

To recover the costs of maintaining this capacity, many utility pricing models—especially in deregulated markets like ERCOT (in Texas) and PJM (in Pennsylvania, New Jersey, Maryland, and beyond)—impose significant fees based on how much power a facility uses during those peaks.

The 4CP Mechanism Explained

In ERCOT, this concept is formalized through the 4 Coincident Peak (4CP) pricing mechanism. Here’s how it works:

ERCOT identifies the four highest peak demand periods, one 15-minute interval each month from June through September.
Your facility’s demand in kilowatts (kW) during those four periods is averaged.
That average demand sets your Transmission Cost Allocation (TCA) for the entire next calendar year.

Many similar variations exist in other markets. In PJM, for example, the 5CP program targets the five peak hours on the grid from June through September—and they do not limit it to just one per month.

Others identify a Coincident Peak every month of the year (12CP), and still others calculate just one overall peak each year. Some grid operators use terms like peak demand allocation, installed capacity tagging (ICAP tags), and resource adequacy, which are all similar pricing schemes designed to increase charges during peak periods.

These charges can show up in many confusing ways, but the implications are the same: if you reduce your load during these critical periods, you can dramatically reduce your bills.

Why Coincident Peak Demand Charges Matter

Coincident Peak programs typically roll up under demand charges, which typically represent 30-70% of a large energy user’s monthly electric bill. While energy efficiency focuses on reducing total kilowatt-hours (kWh), demand management focuses on reducing peak kilowatts (kW)—often a much higher-cost component of energy spend.

Reducing even a single hour of peak energy usage each month can lead to substantial cost savings—especially when applied across a portfolio of sites. The financial impacts of even small adjustments can be massive.

The Challenge: Predicting Coincident Peaks

One of the toughest aspects of coincident peak management is the uncertainty. You don’t know in advance which period each month will be the peak. It’s a guessing game—unless you have access to predictive analytics, real-time load data, and automated controls.

Traditional demand response programs or manual strategies often fall short here. They rely on:

Static scheduling (e.g., pre-scheduled curtailments)
General weather forecasts
Operator intuition

These strategies can be helpful, but they lack the precision needed to control peak periods consistently, without starting curtailments too late or ending them too early.

Smart Demand Management: From Reactive to Proactive

That’s where Ndustrial comes in. We equip industrial operators with real-time energy intelligence and automation tools that take the guesswork out of the equation.

Using a blend of predictive utility grid peak alerts, load forecasting, and automated control of assets, our platform enables operators to respond in real time when grid stress is imminent.

Think of it like a weather radar for your energy consumption. You don’t just know that a storm might come—you can visualize exactly when and where it might come, and you have the tools to adjust operations accordingly.

The 3 Ingredients of an Effective 4CP Strategy

A successful coincident peak management strategy includes two key elements, plus an optional third:

1. Prediction

Use predictive analytics and third-party forecast models to track coincident peak events, including likely days and hours. In Texas, some facilities subscribe to 4CP alert services that monitor ERCOT data in real time. The goal is to identify the few hours that might become 4CPs and prepare for them.

2. Preparation

This means having a flexible load plan in place. Identify which processes, machines, or systems can be curtailed or shifted without compromising production goals. For example:

Curtailing non-essential motors or pumps
Temporarily changing setpoints on HVAC and refrigeration systems
Shifting production schedules

Facilities can also consider on-site generation or energy storage as part of their toolkit. Some vendors are now offering Battery Energy Storage as a Service (BESS-as-a-Service), which allows companies to improve resilience and participate in energy arbitrage with no up-front costs.

3. Automation

Manual response isn’t fast or reliable enough for many demand response schemes, real-time rates, and coincident peak calls. Automation allows for consistent, measurable, and verified reductions in real time. Through Ndustrial’s integrations with a wide variety of industrial control systems, precise curtailments can be triggered instantly based on predictive alerts.

Real-World Impacts

Let’s look at a hypothetical example.

A food processing plant in Texas is subject to 4CP charges. Historically, it pays around $200,000 per year in transmission fees. After implementing a smart demand management strategy using predictive alerts and automated load shedding, the facility was able to reduce its demand during all four peak hours. As a result, its TCA dropped by 40%, saving $80,000 annually—with no impact on production.

These types of results are fairly typical. Some sites may see lower savings, but some are seeing $100,000 or more in savings every year. Multiply this across a portfolio of sites, and the impact becomes very meaningful.

Aligning Economic and Environmental Goals

Coincident Peak management isn’t just about cost savings—it also aligns with broader sustainability objectives.

As noted by the Metropolitan Area Planning Council (MAPC), peak electricity is typically the most carbon-intensive. It often relies on peaker plants that are inefficient and polluting. By reducing demand during peak times, facilities can:

Lower their carbon footprint
Support grid stability
Help integrate more renewables into the energy mix

At Ndustrial, we believe operational intelligence is the key to aligning profit and planet—and peak demand management is a prime example.

Looking Ahead: The Role of Grid Flexibility

As more renewables come online and grid dynamics become more volatile, the value of flexible, responsive demand will only increase. The grid needs not just more clean energy, but smarter energy usage.

Peak demand charges—especially 4CP and other coincident peak programs—are likely to evolve, and new pricing models (like real-time or time-of-use rates) may become more common. But the core principle remains: The more intelligently and flexibly you use energy, the more control you gain—over both costs and carbon.

Ready to slash your Coincident Peak charges?

Coincident peak and 4CP charges may seem like niche concepts, but their impact is massive for large energy users. They represent both a risk and an opportunity.

By adopting a smart, automated, and data-driven approach to peak demand management, facilities can:

Save hundreds of thousands in energy costs
Improve sustainability performance
Future-proof their operations in a rapidly changing energy landscape

At Ndustrial, we make this journey easier. We turn complex energy data into clear actions—because managing demand isn’t just about reacting to the grid. It’s about mastering it.

Coincident Peak graphic showing a mountain peak in sunlight with a rainbow