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Vinlec Fuel Surcharge Rate – Am I missing something here?


EDITOR: This is in reference to the Fuel Sur-charge Rate calculations in the newspapers of September 24, 2004.

The main reason put forward for the increase in the fuel surcharge for August 2004 is a 3.1 per cent increase in customer demand. {{more}}The second sentence states, “This was mainly due to a proportionally greater use of fuel in response to a 3.1 % increase in customer demand this month.” If the SALES increased by 3.1 per cent and the percentage system loss remained the same, then the UNITS GENERATED should have increased by about 3.1 per cent. Except for a sudden change in the kilowatt-hours per gallon output of the generators, the FUEL CONSUMPTION should also increase by about 3.1 per cent. This clarifies Vinlec’s statement in terms of proportionality. However, shouldn’t this also contribute to an increase in the COST IN EXCESS OF BASE PRICE by a factor of 3.1 per cent since it is directly proportional to the FUEL CONSUMPTION?

COST IN EXCESS OF BASE PRICE is actually FUEL CONSUMPTION*(AVERAGE PRICE – BASE PRICE). The formula for Fuel Surcharge Rate is (COST IN EXCESS OF BASE PRICE*100)/( SALES); the 100 simply converts dollars to cents. Based on the above reasoning, both the top and bottom of the formula are increased by a factor of 3.1 per cent (i.e. multiplied by 1.031).

The factor cancels out; therefore, the 3.1 per cent increase in customer demand should not affect the fuel surcharge.

Am I missing something?

Francis Pereira