Regression and Utility Rates; Sustainability For several years, many utilities haveemployed regression analysis to forecast monthly utility usage by residential customers usingweather forecasts, the number of holidays, the number of days in the month, and other factors.For example, the Connecticut Department of Public Utility Control (CDPUC) has determinedthat regression, properly used, can accurately predict natural gas usage. Most public gas utilities serving Connecticut have reported levels of accuracy from 4% to 10% using regression.One company, Dominion Natural Gas Company of Ohio, uses this approach not to forecast, butto explain to customers why their natural gas bills have gone up or down compared to the priormonth and to the same month of the prior year. The bill shows total MCF (thousand cubic feetof natural gas) used by the customer for that month and why the total MCF usage has changed,based on three factors:1. Change in temperature. Each degree increase in temperature causes an increase in the number ofMCFs consumed. The relationship between the change in temperature and the usage of MCF isnot linear, but the monthly bill shows the average change in temperature for the month and theincrease or decrease in MCF related to that change.2. Number of billing days in the period.3. The residual—the change in usage by the customer that is not attributable to temperature or thenumber of days in the billing period.A customer of Dominion has used 13.7 MCF in December and is charged $12.50 per MCF for a totalbill that month of $171.25. The following data are available to compare the current month’s weatherand billing period to the prior month and to the same month last year:Usage Factors Current Month vs. Last Month Current Month vs. Last DecemberWeather 3 degrees cooler;+2.5 MCF 8 degrees warmer;–3.5 MCF Number of billing days 5 more days; +0.5 MCF 1 less day; –0.1 MCF Customer-controlled usage +0.9 MCF per billing period –1.8 MCF per billing periodRequired1. Determine the amount of difference in the customer’s bill from the prior month and from the currentmonth last year.2. How does Dominion’s billing system affect environmental sustainability?
Regression and Utility Rates; Sustainability For several years, many utilities have
employed regression analysis to
weather forecasts, the number of holidays, the number of days in the month, and other factors.
For example, the Connecticut Department of Public Utility Control (CDPUC) has determined
that regression, properly used, can accurately predict natural gas usage. Most public gas utilities serving Connecticut have reported levels of accuracy from 4% to 10% using regression.
One company, Dominion Natural Gas Company of Ohio, uses this approach not to forecast, but
to explain to customers why their natural gas bills have gone up or down compared to the prior
month and to the same month of the prior year. The bill shows total MCF (thousand cubic feet
of natural gas) used by the customer for that month and why the total MCF usage has changed,
based on three factors:
1. Change in temperature. Each degree increase in temperature causes an increase in the number of
MCFs consumed. The relationship between the change in temperature and the usage of MCF is
not linear, but the monthly bill shows the average change in temperature for the month and the
increase or decrease in MCF related to that change.
2. Number of billing days in the period.
3. The residual—the change in usage by the customer that is not attributable to temperature or the
number of days in the billing period.
A customer of Dominion has used 13.7 MCF in December and is charged $12.50 per MCF for a total
bill that month of $171.25. The following data are available to compare the current month’s weather
and billing period to the prior month and to the same month last year:
Usage Factors Current Month vs. Last Month Current Month vs. Last December
Weather 3 degrees cooler;
+2.5 MCF
8 degrees warmer;
–3.5 MCF
Number of billing days 5 more days; +0.5 MCF 1 less day; –0.1 MCF
Customer-controlled usage +0.9 MCF per billing period –1.8 MCF per billing period
Required
1. Determine the amount of difference in the customer’s bill from the prior month and from the current
month last year.
2. How does Dominion’s billing system affect environmental sustainability?
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