AEC Market Education Module #12
Load Factor - Calculation and How it Drives Your Rate
Section 1 · Calculator
Calculate your load factor
Pull the numbers from any electricity bill — the kWh used and the peak demand (kW) for the period. Use the single-month view for a quick check, or the 12-month view for what your REP actually evaluates when they price your contract.
Total energy consumed for the period
15-minute interval peak demand
Match your bill's service period
Load factor — single month
--%
0%30%50%70%90%100%
Section 2 · Definition
Two customers can use the same kWh and pay very different prices
Load factor measures how flat or peaky your consumption is. It compares the average kW you draw across a billing period against the highest kW spike your meter recorded in that same window. The closer those two numbers are, the higher your load factor — and the cheaper you are to serve.
Single month
LF = kWh ÷ (Peak kW × Days × 24) × 100
Hours in period = days in the billing cycle × 24
12-month annualized
LF = Annual kWh ÷ (Peak kW × 8,760) × 100
Peak kW = highest monthly peak across the 12 months
Customer A — flat profile
75%
Steady draw across all 24 hours. The REP can buy block power and serve the load efficiently.
30,000 kWh56 kW peak
Customer B — peaky profile
28%
Big mid-day spike. The REP must source expensive on-peak power and hold capacity for the spike.
30,000 kWh149 kW peak
Same kWh. Same TDU territory. Same contract term. Different price.
Section 3 · Pricing impact
Six places load factor moves your fixed price
A REP doesn't multiply your annual kWh by a single market rate. They lay your usage profile against the wholesale forward curve and cost out every component — energy, capacity, ancillaries, transmission, line losses, risk margin. Each of those is sensitive to the shape of your load.
01
Energy at peak vs. off-peak hours
ERCOT settles 15 minutes; the forward market trades on-peak (HE 7–22 weekdays) and off-peak. A peaky load clusters in the most expensive hours of the year — summer afternoons. A 24/7 manufacturer hits cheap nights and weekends. Same kWh, materially different sourcing cost.
Embedded in fixed price
02
Capacity allocation
The REP forward-purchases generation sized to your peak, not your average. A 100 kW peak with 30% LF means they're carrying capacity for 100 kW that's only fully used a handful of hours per year. The cost of that idle capacity gets distributed across the kWh you do consume.
Embedded in fixed price
03
Ancillary services
Regulation, responsive reserve, and ECRS are sized to system-wide peak. A peaky customer contributes more to system peak than a flat customer with the same kWh, and the REP allocates the ancillary cost accordingly. In ERCOT this typically rolls up into one or two pass-through line items.
Pass-through on most contracts
04
TDU demand charges
Every commercial bill carries a $/kW demand charge from the wires company on top of the energy charge. That hits your peak kW directly. Same kWh at a higher load factor means a lower peak, which means a lower TDU demand bill every month for the full term.
Direct pass-through
05
Forecasting risk premium
Predictable loads are easy to hedge. A flat data center barely moves. A church with twice-weekly services, a wedding venue, or a school is volatile. REPs price uncertainty into the bid — the harder you are to forecast, the wider the margin they build in.
Risk margin in the bid
06
4CP transmission allocation
For IDR-metered loads, ERCOT allocates transmission cost recovery based on demand during four 15-minute summer peak intervals. A flat load gets blended exposure; a peaky summer-afternoon load can pay disproportionately. We unpack this in Section 7.
Pass-through, large customers
Section 4 · Typical ranges
Where your industry usually lands
Load factor varies systematically by use case. The ranges below are generalizations — specific buildings can land anywhere depending on operating hours, occupancy, and equipment. The pricing implication holds in either direction.
Below 30%
Schools (closed weekends, summers), churches, restaurants with limited hours, seasonal retail, event venues, dance studios, wedding halls.
Highest premium — capacity sits idle most hours and sourcing peaks fall in expensive windows.
30–50%
Standard office buildings, mainstream retail, medical and dental practices, mid-size hotels with light occupancy, mixed-use commercial.
Above-average premium — the typical commercial profile most REPs assume by default.
50–70%
Light manufacturing on a single shift, multi-family residential, full-service hotels, hospitals, supermarkets, grocery-anchored retail.
Mid-pack pricing — predictable load with meaningful nightly drop-off but acceptable spread.
70–90%
Continuous manufacturing (two or three shifts), cold storage, telecom hubs, indoor agriculture, water treatment, certain warehousing.
Best fixed-price tier short of 24/7 industrial — REPs compete aggressively for these loads.
90% and up
Data centers, 24/7 industrial, crypto mining, certain petrochemical sites, large-scale water utilities.
Cheapest pricing in the market — flat, forecastable, sometimes priced near wholesale plus minimal adders.
Section 5 · Real-world spread
What a peaky profile costs
Every fixed-price contract has your load profile priced into it. The premium for a peaky shape might not be labeled on the quote, but it's there whether the rate came from a published price sheet for a smaller site or a custom bid for a 5,000 MWh customer.
Profile
LF range
Premium vs. flat
Description
Flat/High
60% and above
Baseline
Lowest cost to serve
Typical/Medium
40 to 60%
2 to 4 percent
Standard commercial profile
Peaky/Low
Under 40%
6 to 9 percent
Most expensive to serve
Ranges reflect what we see on competitive bids across the major TDU territories. The exact figure varies with the forward curve and contract timing, but the order of magnitude is consistent across most market conditions.
Two or three percent on the energy rate doesn't sound like much in isolation. Applied to every kWh consumed across a multi-year contract, layered with the TDU demand charge that scales directly with your peak, the cumulative gap between a peaky and flat profile becomes real recurring exposure.
The improvement strategies in the next section are about moving your profile toward the better end of that gap.
Section 6 · Improvement strategies
Where the slack actually lives
Improving load factor isn't free, nor is a feasible option for many customers, but for the right facility it pays back through both lower TDU demand charges and lower energy rates on the next contract. The lower your starting load factor, the bigger the move available.
Capital strategy
Peak shaving
Battery storage, demand limiters, or on-site generation that activates during peak windows. The asset doesn't need to power the whole site — it just needs to clip the peak. Capital intensive, but pays back fastest at low-LF facilities where the demand charge is the dominant cost.
Operational strategy
Schedule optimization
Shift non-essential loads — HVAC pre-cooling, water heating, EV charging, equipment startup, batch processes — out of the peak window. No capital required, just controls and discipline. The hardest part is identifying what can move without affecting operations.
Controls strategy
Equipment staging
Sequence the startup of large motors, chillers, and compressors so they don't all hit at once. Avoid simultaneous demand spikes from facility-wide power-on cycles after holidays or weekends. Often handled at the BAS or smart panel level with minimal investment.
Section 7 · 4CP — the Texas-specific kicker
Four 15-minute intervals that drive a year of transmission cost
ERCOT 4CP · Four Coincident Peak
Your demand during four specific 15-minute intervals next summer determines your share of TDU transmission cost recovery for the following twelve months.
Each summer (June through September), ERCOT identifies the single 15-minute interval each month with the highest system-wide demand. Your load's average kW across those four intervals becomes your 4CP demand. That number gets multiplied by the TDU's transmission rate for the next 12-month period and shows up on every commercial bill in your TDU territory as the transmission cost line.
For non-IDR loads under 700 kW peak, this allocation method doesn't apply — you're billed on a different methodology. But for IDR-metered commercial and industrial sites, 4CP is one of the largest discretionary line items on the bill. A load that successfully curtails during all four 15-minute peaks can reduce next year's transmission allocation by 30% or more.
The catchYou have to predict which 15-minute intervals will be the system peaks. They aren't announced in advance. There are forecasting services that issue 4CP alerts when system conditions point at a likely peak.
What it's worthFor a 1 MW load, a successful 4CP curtailment program can save tens of thousands of dollars in annual transmission cost. The math scales with your demand and your TDU's transmission rate.
Connects toDemand-side management programs that combine 4CP forecasting with utility curtailment incentives can stack the savings. We cover the demand-side angle separately on the Demand Side Management service page.
Why it matters hereEvery time someone says "load factor doesn't really change my price that much," they're usually missing 4CP. For large loads in Texas, this single mechanism can move the all-in cost more than the energy rate itself.
4CP applies to TDU territories within ERCOT that use this allocation method — Oncor, CenterPoint, AEP Texas, and TNMP all do.
Section 8 · Texas extremes
The flattest and peakiest loads in ERCOT
Real examples from across the state — the load profiles you'd expect at each end of the spectrum. The percentages below are typical ranges for facilities of this kind based on operating patterns. Specific sites vary with size, schedule, and how much auxiliary load runs year-round.
Highest load factors
Cheapest commercial loads to serve
01
Crypto mining
Rockdale · Childress · Corsicana
~95% and up
Pure resistive load running 24/7. Only steps off when ERCOT economics make it cheaper to curtail than to keep mining. Texas hosts more of this load than any other state in the country.
02
Petrochemical & refining
Houston Ship Channel · Freeport · Port Arthur
~85–95%
Continuous process plants. Compressors, pumps, and electrolysis run flat because shutting down costs more than running. The Gulf Coast cluster is one of the largest concentrations of high-LF industrial load on Earth.
03
Hyperscale data centers
DFW · San Antonio · North Austin
~80–92%
Compute load is steady around the clock; cooling load fluctuates with weather but the overall building draw stays remarkably flat. The fastest-growing high-LF segment in Texas right now.
04
Steel & metals
Sinton · Jewett · Beaumont
~75–85%
Electric arc furnaces cycle within minutes, but at the 15-minute settlement interval the average runs high. REPs price these aggressively when bidders compete for the load.
05
Major water utilities
Statewide municipal pumping
~75–85%
Pumping runs more or less continuously, with modest seasonal variation. Water districts and municipal utilities across Texas land here.
Lowest load factors
Most expensive commercial loads to serve
01
Friday night high school football stadiums
Statewide — thousands of them
~3–10%
Lights and PA on for four or five hours one night a week, ten weeks a year. Dark the rest of the time. Among the most peaky common loads in the state, even before you account for booster club concession trailers.
02
Motorsports venues
Texas Motor Speedway · Circuit of the Americas
~5–15%
A handful of race weekends per year drive enormous lighting, grandstand, and broadcast loads. Between events the facilities draw close to nothing relative to that peak.
03
State Fair of Texas operation
Fair Park · Dallas
~10–20%
Three weeks of full-throttle operation each fall, dormant the rest of the year. The wider Fair Park complex runs higher because the Cotton Bowl and museums stay lit, but the fair operation itself is severely peaky.
04
NFL & MLB stadiums
AT&T Stadium · Globe Life Field · NRG · Minute Maid
~15–25%
Game-day spikes are massive — field lighting, HVAC, scoreboards, concourse. Year-round office, retail, and tour operations keep the baseline above zero, which lifts the load factor out of single digits.
05
Megachurches
Lakewood (Houston) · Prestonwood (Plano) · Gateway (Southlake)
~20–30%
Sunday morning peak dominates the weekly profile. Midweek programming, school operations, and broadcast facilities fill in some of the rest, but the spread between Sunday and Tuesday at 2am is wide.
Ranges reflect typical operating profiles for facilities of each type, not specific site measurements.
Want to know what your actual load factor is — and what it's costing you?
If you can pull twelve months of bills (or have a recent IDR file), we can run the calculation, benchmark you against comparable loads in your TDU, and tell you what the fixed-price spread looks like at your current shape.
Get started