Projecting fuel budgets by means of degree days

By Vilnis Vesma. January 2000
Most people budget for heating fuel by reference to a prior year's consumption. Some will attempt to allow for prevailing weather by making an adjustment using degree-day figures for the regions in which their buildings are located. This is important because a mild winter (and we have now had three in a row in the UK) will, if unrecognised, result in an underestimate.

To carry out a degree-day adjustment you need to know how much of your fuel consumption is fixed, and how much is weather- dependent. The fixed element carries over from year to year but the weather-dependent part will vary in proportion to degree days. To forecast how much weather-dependent fuel you will need next year, you must first work out how much you used last year. That bit's easy - just deduct the fixed portion from the total (as an approximation, your fixed portion is twelve times the lowest monthly consumption).

Then you need to know the total degree days for last year (available from yours truly) and ditto for next year (not so easy, but I'll come back to that). The following arithmetic then needs to be carried out:

  1. Divide last year's weather-dependent consumption by last year's degree days
  2. Multiply the result by next year's expected degree days
  3. Add back the 'fixed' component of demand

How do you arrive at next year's degree days? The ideal way is to use a 12-month weather forecast, but this is expensive and not necessarily any more reliable than assuming that next year will be "average". Twenty-year average degree days are available for heating and cooling, and to assorted base temperatures, for the 18 standard Uk reporting regions. Download them free as an Excel worksheet