Monday, January 16, 2012

SP Services charges are up again from Jan 12..

Source: SP Services

As you can see from the graph if you are wondering how SP Services manage to keep the 'costs' moderated while the fuel oil prices are going to the roof then you're an innocent person who doesn't know this phrase

 "Lies, damned lies, and statistics"

Below is the graph I reproduced from the data given by SP Services. (I've checked the numbers but please let me know if you see any typos. I am not an accountant but an engineer with some interest in $ & C). This is similar to what SP Services is showing in their web site or sharing with public in news papers. It simply gives an impression that they are doing a good job moderating the charges or normalizing the charges by some intelligent/smart way of planning or hedging.

Now the thing is I want to introduce "logarithmic graph" concept. If you see the charts from stock market or technical analysis the recommendation is always to use "log" option. Reason is it graphs the growth in % terms but not in absolute $ values. This is quite critical because if the stock value grows from 10 to 20 and 20 to 40 the rate is shown the same on logarithmic graph. But on a normal scale the slope looks much higher :)

So now lets see the logarithmic graph of SP Services.

As you can see from the image the variation is perfectly in sync. Which means when fuel prices are increased by 10%, the Electricity charges are increased by 10% (one may argue that the rate of increase is diff which is true because of backdated pricing) or if it drop by 10% then the Electricity charges are dropped.

Conclusion: There is no smart guy sitting down there and seriously hedging the prices and moderating the impact. :)

By the way I know that we are not using Petrol but natural gas and I don't want to make things more complex.

Sometime back I did some noob calculations on inflated vs normalized charges too. It can be found here.

1 comment:

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