The Importance of Forecasting Annual Usage Before Procurement

Forecasting annual electricity and gas consumption is one of the most important -- and often underestimated -- stages of the procurement process. While timing the wholesale market and contract structure typically receive the most attention, the accuracy of the consumption forecast can have a large influence on overall energy costs. Suppliers price risk based on expected volumes, network charges are dictated by usage patterns, and internal budgets depend on accurate projections. Without a reliable forecast, organisations expose themselves to avoidable financial and contractual risk.

How Consumption Forecasting Works

Forecasting begins by analysing historical usage. Half-hourly electricity data, meter reads, and seasonal profiles provide a baseline that shows how a site behaves over time. This historical data is then adjusted to account for known changes, such as production increases, machinery upgrades, operational reductions, or energy efficiency projects.

For larger or more complex organisations, forecasting may involve modelling peak demand, load shape, and expected operational shifts across multiple sites. The aim is not simply to estimate an annual total, but to understand when and how energy will be consumed throughout the year. That detail becomes particularly important when selecting contract structures or assessing exposure to network charges.

How It Impacts Budgeting

Energy often represents a significant operational cost, particularly for manufacturers and other energy-intensive users. Accurate forecasting enables finance teams to build realistic budgets and avoid the shocks of unexpected costs.

Reliable forecasts also allow organisations to model different pricing scenarios. Understanding likely consumption enables comparison between fixed contracts and flexible purchasing strategies. It also supports long-term planning by quantifying the financial impact of operational changes or sustainability initiatives.

How Consumption and Capacity Changes Can Impact TCR Banding (and DUoS/TNUoS Costs)

Beyond wholesale costs, consumption levels influence network charges. Under the Targeted Charging Review (TCR) reforms, fixed charges -- such as TUOS and DUOS charges -- are now determined by banding structures rather than just usage. Changes in agreed capacity, peak demand, or consumption patterns can therefore shift a site into a different charging band.

If a business has made changes and are now consuming less than during their last TCR banding review, they may be paying more than they need to in TUOS and DUOS charges as their banding hasn’t been adjusted.

As well as annual usage, it is also important to review the kVA usage to ensure that the agreed capacity levels in the contract are not far above or below what is actually being consumed.

How Inaccurate Forecasts Can Harm Flex Customers

Flexible procurement strategies rely heavily on accurate volume forecasting. When suppliers execute trades, they do so against an expected consumption profile. If actual demand is different from that forecast, the purchased volumes may create a shortfall which then necessitates the need for further energy to be bought on the volatile Day Ahead market.

Whereas over-purchasing in a falling market can leave a customer over-hedged at higher prices. In both scenarios, the flex benefits of a structured, risk-managed market exposure is undermined.

How we can help

Accurate annual consumption forecasting underpins every successful energy procurement strategy. It informs contract selection, strengthens budgeting accuracy, reduces exposure to reconciliation and imbalance risk, and ensures network charges are properly managed. For flexible customers in particular, it is central to achieving the intended benefits of structured purchasing.

Forecasting should not be treated as a one-off exercise completed before contract signature, but as an essential process that is regularly reviewed and refined.

If your organisation needs assistance in checking that your energy forecasts, kVA capacities, and TCR bands are correct, contact us today. Our experienced team of energy experts can make sure your business aren’t paying a penny more than you have to.