A unit used by utility companies to roughly predict the rate at which you will use energy to heat or cool your home or business.

To calculate the degree days, get the average temperature for the day by adding the day's high to the day's low and dividing by two. If this is above 65ºF the difference is the number of cooling degree days, if it is below 65ºF, the difference is the number of cooling degree days.

Your energy bill will probably roughly follow the same pattern over a season as the heating/cooling degree days.

Working for Enbridge Gas Distribution, we use Degree Days as a factor to calculate what your gas bill should be when we estimate your bill (bi-monthly estimates; though we are only required by law to read your meter twice a year). Since we're a canadian company, I'll use metric calculations:

We calculate "degree days" as the average (the high and low number of degrees in a 24hr period, divided by 2) number of degrees below 18°C (64°F), since this is the average temperature outside that most homeowners would start heating their home (the time furnaces would kick in). Keep in mind that degree days are not calendar days, since a degree "day" is actually the number of degrees that the temperature is below 18°C in a 24-hour period.

Examples:

Suppose it's a cold winter day and the temperature outside is -10°C. The degree days would be calculated by taking 18°C - ( -10°C ) = 28 degree days.

Now, suppose it's a bit colder outside the next day. If the temperature is -17°C, you would calculate the degree days by 18°C - ( -17°C ) = 35 degree days.

In this 2-day period alone, we have calculated 63 degree days. So, in a billing period, you can very have many degree days on colder months, and possibly none at all during the summer months.

Enbridge (and I imagine most other utilities) calculates degree days according to the "heating season," which is September 1 of each year. Different areas are colder than others, and since temperatures are never the same each years, the degree days in a heating season will very rarely be the same.

Sources:
http://www.cgc.enbridge.com/A/A07-01_faqs.asp
http://www.cgc.enbridge.com/pdf/how-cold.pdf

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