Integrating non-climate factors into a natural gas purchasing decision: Learning from the user

ABSTRACT

This paper illustrates a key lesson related to most uses of long-range climate forecast information. That is, effective weather-related decision making requires understanding and integration of weather information with other, often complex factors. Northern Illinois University's heating plant manager and staff meteorologist, along with a group of meteorology students, worked together to assess different types of available information that could be used in an autumn natural gas purchasing decision. Weather information assessed included the impact of ENSO events on winters in northern Illinois and the Climate Prediction Center's (CPC) long-range climate outlooks. Non-weather factors, such as the cost and available supplies of natural gas prior to the heating season, contribute to the complexity of the natural gas purchase decision. A decision tree was developed and it incorporated three parts: 1) natural gas supply levels, 2) the CPC long-lead climate outlooks for the region, and 3) an ENSO model developed for DeKalb. The results were used to decide in autumn whether to lock in a price or ride the market each winter. The decision tree was tested for the period 1995-1999, and returned a cost-effective decision in three of the four winters.