Small changes in Electric Tariff?

Since the electric tariff increased by 21.5% for October 08 to Dec 08, there has been increased attention on the price of electricity, especially during the current economic downturn. Following the drop in oil price, the tariff will decrease by 24.7% for the Jan 09 to March 09 period. There was an advertisement on the Electricity Tariff Revision by SP Services on Today paper on 5th Dec.

I was attracted to the graph which shows the historical Fuel Oil Price (S$/bbl) vs Low Tension Tariff. Shown below is the graph in the ad.

What’s your first impression of the graph? Let’s see if we have the same thoughts. 

• Electricity tariff is very low compared to the Fuel Oil Price (Even the graph title is Fuel Oil Price vs Low Tension Tariff)
• The electricity tariff seems to be very stable
• The volatile oil price has not translated into volatile tariffs. Even with the recent huge movements in oil price, the tariffs has a much smaller corresponding movement

But hey, wait a min… Didn’t the tariffs just increased by 21.5% for the Oct to Dec 08 period and decreased by 24.7% for the Jan to March 09 period? How come there was just a slight movement in the graph for that period?

The answer lies in the scale used.

Although the scale used for the Fuel Oil Price and LT Tariff is in (S$/bll) and (¢/kWh) respectively, both have used the same numeric scale from 0 to 180. By drawing the graph in this way, the tariff would appear to be much smoother than actual. Below is the graph I redrew by using a more appropriate numeric scale of 0 to 35 for the LT Tariff.

Would such a graph make you see the situation differently?

In the course of your own financial planning, be it in insurance or investment, it is not difficult to come across all sorts of historical performance or non-guaranteed future projections. The numbers or figures may look very attractive, even too good to be true. But take note, you may not be getting the ‘correct picture’.

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Tags: Mis-selling