It’s recently come to our attention that there are some fairly substantial market changes that are impacting commercial customer electricity statements. These market changes have to do with something called the 4 Coincident Peak (4CP) program.
If you participated in this program in 2016, then you might have already noticed that your utility has sent you new charges. The reason for this is because they have determined that your meter’s “demand element” has changed.
But what do these changes really mean? What is the 4CP program and why are utilities suddenly applying new charges? And how can you benefit from this program moving forward?
What is the 4CP Program?
Those participating in the 4CP program have the opportunity to maintain lower transmission cost of services charges on their electricity bills. How the program works is that if participants have the opportunity to voluntarily reduce their energy consumption on one day, during a specific period of time in June, July, August and September. ERCOT refers to these as, “15 minute peak events”. The reductions in cost are applied during the following year.
For example, in 2016, the “15 minute peak events” landed on, June 15th, July 14th, August 11th and September 19th. The 4CP charges would then appear between January – April 2017.
Consumers who wish to participate in 2017 should contact us, their Retail Electricity Provider (REP), or their utility for more information. At that point, the consumer can expect to be notified via email, standard mail, or even text message of the (predicted) upcoming dates. A second update will be sent, which will indicate a two-hour window for when the consumer should reduce their energy load or consumption.
Who Can Participate?
There are a few stipulations to who can sign-up for and participate in the program. These stipulations include:
- Customer must have interval metering data available
- Receive 4CP transmission charges
- An account with a peak load of more than 100kW
That being said, if you qualify as a customer, you do not need to sign up for or participate in 4CP. It is completely voluntary, but an incredibly simple way to save on your electricity bills. In addition, if you do not participate in the first peak event, you don’t need to worry. You can simply participate in the remaining peak events, or only one peak event. You don’t have to join in on every single event to gain the benefits of the program.
There is no fee or cost to joining and participating in this program. It’s absolutely free!
How are 4CP Program Discounts Determined?
Like any other energy related charge, the discounts for participants that lowered their consumption during ERCOT’s defined “15 minute peak events” are determined by a series of pre-determined calculations. These calculations are 100% transparent. In fact, if you want to take a look at these calculations yourself, ERCOT provides this information on their website. The information currently available starts from 2015, and goes all the way back to 1996.
The calculations for 4CP is defined as follows: “the average of the customer’s integrated 15 minute kW (or kVA) demands at the time of the monthly ERCOT system 15 minute peak kW demand for the months of June, July, August and September of the previous calendar year.” Every year, the 4CP is updated on January 1st. This amount remains the same and will not change for the duration of the year.
4CP Terms & Other Details
When you participate in 4CP, it is important to make sure that you know and understand all of the terminology associated to the program and invoice you will receive. In fact, when it comes to the nitty-gritty details of the 4CP program, there are many terms that may or may not be familiar to you.
The following list aims to define some of the terms you will see on your contract or will simply need to know about when it comes to the 4CP program.
Transmission Distribution Utility: The transmission distribution utility (TDU) distributes electricity to homes and businesses. They also own and operate all of the equipment and buildings that allow them to distribute electricity. This company also has the technology to read your meter to determine consumption for a period of time. Reading the meter during the 4CP dates and times is critical to determining the correct billing.
Actual kW: This is value is determined by an electric meter. It defines the peak kW demand for a given billing period.
Adjustments: If there are changes to meter readings or rates during a period that the customer has already been billed for, this is known as an adjustment. This is important should ERCOT determine that the 4CP calculations were incorrect during any given year.
Demand Charge: Typically averaged over a period of time, or during a specific time. The charge is based on the rate the electricity is delivered and is related to the Actual kW.
Non-Coincidental Peak: If a customer consumes less than 700kW this term is applicable to invoices. The amount is the same or similar to the peak demand (during a billing period).
Benefits to the 4CP Program
The major benefit to understanding the 4CP program is that it helps commercial businesses to save money. Companies that participate in the program, and understand how to lower their usage during the defined dates can take better control over the amount that they are invoice during a particular billing period.
According to Ron Widup, the executive VP of Shermco, “Basically, you want your demand to be as low as possible when the grid hits its peak. If you can change scheduled maintenance periods, coordinate shift changes, turn off non-critical loads, reduce chiller or air-handler loads, or basically reduce your power consumption by any amount in anticipation of the four 15-minute intervals when ERCOT is likely to hit its system peak, the benefits will be seen for an entire year.”
Gexa Energy also agrees that there are significant savings to participating in 4CP. Based on some estimates, they determined that a company could save approximately $14,704.46 each year.
What Happened in 2016?
In order to come up with the 2016 calculations, ERCOT used several elements including, the 2016 4CP Report, Settlement and Resettlement data. The Settlement data relies on the Transmission/Distribution Service Providers. If this information is not provided quickly, ERCOT will estimate the missing values. All of this information is passed through ERCOT’s systems, which and has been done this way for many years.
However, for the July 2016 peak interval, the system experienced a glitch. The 2016 4CP report indicated that the peak interval occurred on July 14th at 16:00. During this time (15:50 to be precise), “the East DC Tie tripped offline while importing approximately 581 MW” (as stated in Docket No. 46604).
As a result, ERCOT were required to investigate the issue. Based on what they discovered, they determined that the actual peak period ended at 16:30. This meant that the charges for that peak interval on July 14th for many commercial customers were incorrect.
As required by law, ERCOT then presented this change to the PUC of Texas for review. PUC Texas approved these changes on March 30, 2017 via Docket No. 46604.
What Happens Now?
In order to correct the above mentioned error, the Public Utilities Commission of Texas has approved Docket No. 46604. This Docket allows utilities to cancel and re-bill commercial customers who participated in 4CP 2016 during July 14th, for the period of January – April 2017. New bills will include the correct amount for the previously incorrectly calculated 4CP period.
Unfortunately, for many retail electricity providers, this has caused significant issues and concern amongst their commercial customers. In some cases, utilities sent the adjustments before the customer could be made aware.
Despite these issues, if you are a commercial customer who participated in 4Cp during the July 14th peak interval, you can likely expect to see an adjustment in the mail. This adjustment will not have an impact on the 2017 4CP program. Participants can still expect to receive information on upcoming dates so that they can benefit from reducing their loads in 2018.