The short answer
PJM capacity tags are set by your account average usage during the top 5 hottest summer afternoons. The tag locks for 12 months. To reduce: subscribe to PJM peak alerts and shed load during forecasted peak windows (typically 4-7 PM on hot weekdays). A 10% tag reduction saves 10% of the capacity charge for the entire next year.
Capacity tags are the once-a-year mechanism by which PJM, ERCOT, and other US grid operators charge commercial customers for their share of the regional capacity market. Your tag is set based on your usage during the 5 peak hours of the previous summer. If you ran heavy load during those 5 hours, you get a high tag; the tag locks in for the next 12 months. Skilled tag management can cut the capacity portion of a commercial bill 15-30%.
Forecasting the peak hours
PJM publishes a real-time peak alert system. ERCOT does the same via their 4CP forecasting service. Subscribe to these alerts directly or via your supplier.
Third-party services (Energy Toolbase, EnergyHub, Voltus) provide more sophisticated peak-hour forecasting with machine-learning models.
Manual heuristic: peak hours are almost always 4-7 PM on the hottest weekdays in July or August. Weather forecast + 95+°F prediction = high probability of system peak that day.
Infographic
Peak shaving during a 4-7 PM tag-day window
Load-shedding playbook
When a peak alert triggers, drop non-essential load during the 5-hour window. Targets: HVAC setpoint up 4°F (commercial buildings), defer high-load production runs, idle backup equipment.
For manufacturing: schedule energy-intensive operations outside peak hours. A 4-hour shift in production schedule on 5 days/year can drop tag 15-25%.
For office buildings: pre-cool the building 1-2 hours before the peak window starts. Float setpoint 4°F up during the peak. The office-building-energy-procurement guide covers Class-A office strategies.
Recap
Bottom line
Capacity tag management is the highest-leverage commercial energy strategy outside of supplier shopping. PJM 5CP and ERCOT 4CP measure your peak hour kW during the previous summer; that measurement locks in your capacity charge for the next 12 months. Curtailing during forecasted peak hours can drop the tag 15 to 30 percent, saving thousands to tens of thousands of dollars annually on demand-heavy facilities.
Combined with active demand response participation and supplier RFPs every 12 to 24 months, capacity-tag management is the operational core of mid-market commercial energy strategy. The capacity-market-pjm-ercot-explained guide covers the underlying market mechanics; the commercial-rfp-guide and commercial-energy-bill-audit-walkthrough guides cover the procurement and audit workflows that pair with operational tag management.
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