Using your skills: Reducing your gas and electricity costs

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Emery Quinn
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1 About this assignment This assignment will help you to develop and practise numeracy skills that can help you make decisions about money. It asks you to use a number of these skills together to work through an everyday consumer problem. You will use information about the cost of gas and electricity from different suppliers and will be asked to make judgements about which might be the best option for your circumstances. This assignment is also about calculating fuel. Your task is to help a friend review her current gas and electricity and consider whether she could make savings on them by changing supplier. You will also look at information about several different payment tariffs and work out the of electricity for two of these. There are two parts to the assignment: Part 1: Investigating different suppliers Part 2: Comparing options in detail. 1 Numeracy at Level 1

Part 1 Investigating different suppliers Setting the

she might be able to significantly reduce the cost of

She has used a cost comparison web site to get some

through which she could buy her gas and electricity.

2 Part 1 Investigating different suppliers Setting the scene Your friend is interested in finding out whether she might be able to significantly reduce the cost of her gas and electricity bills. She has used a cost comparison web site to get some guidance about whether there might be cheaper suppliers through which she could buy her gas and electricity. Below is the information from the cost comparison web site she has visited. 2 Numeracy at Level 1

You might want to print this out so you can refer to it easily while you are working.

recommendation of the service provider and tariff that looks like it will save the most

It also lists a range of options in order of the amount of the estimated annual saving.

The recommended option appears as the first item in this list.

3 You might want to print this out so you can refer to it easily while you are working. Finding your way around this information As you can see, this web site offers a recommendation of the service provider and tariff that looks like it will save the most money per year. This is in the first section of the web extract. It also lists a range of options in order of the amount of the estimated annual saving. This is in the second section of the extract. The recommended option appears as the first item in this list. Questions with this symbol are for you to think about and perhaps to talk about with someone else. You do not need to write down an answer unless you think it would be helpful. 3 Numeracy at Level 1

4 Thinking about the best option Will you advise your friend to accept the recommendation offered, or to look at the range of options and find out a bit more about them? What things might she take into account in deciding which provider and tariff might offer the best option for her in her particular circumstances? Interpreting the results 1 Look at the recommended supplier and tariff in the first section of the web site extract. Check that you understand the information. Where would you find the following? What is she paying now (according to this summary)? What would she pay if she changes to the supplier and tariff recommended? How much would it save her if she made this change? 2 Look at the range of options in the list of suppliers and tariffs. This is in the second part of the extract. Think about the information this list gives. Based on the information given, which of the options would you be most likely to recommend that your friend consider? You may want to balance in your thinking: the relative of the different options; and the information given about the level of service ratings the options have received. 4 Numeracy at Level 1

5 What recommendation would you offer your friend based on your consideration of these factors and the information in the web site extract? If you are working with someone else, explain your suggestion to a fellow learner or your tutor. Annual gas and electricity The accuracy of the estimated cost information that this sort of web site gives you will depend on the information on which the web site is basing this estimate. Some sites ask you to enter information into the web site about your annual gas and electricity consumption to give you a more accurate picture. You may do this when you first make a search on the site. You may have the option to do a more detailed search and will need to choose this option. This might be called something like an advanced search. How and where will you get the information about your friend s annual gas and electricity? Depending on how she currently pays for her fuel, you may need to think about how to use this to work out the cost over the whole year. Your friend finds her most recent gas and electricity bills, which were for: Gas 285 Electricity 105 What things will you need to think about to work out your friend s annual electricity? How often does she receive bills? What period of time does each bill cover? What time of year is the bill for? Why does this matter? How accurately do you need to work out her annual? Do you need to work out exactly what she s spent or will an estimate be OK? 5 Numeracy at Level 1

3 Fill in the table below to show how you might work out the annual cost for each of the different methods of payment listed. The first one is done for you.

6 3 Fill in the table below to show how you might work out the annual cost for each of the different methods of payment listed. The first one is done for you. Payment method Regular monthly amount How could you work out the annual? You would multiply the 12 months of the year by the amount of the monthly payment. Monthly direct debit (amount of fuel used) Quarterly payment by cheque on receipt of bill Pre-payment by putting a regular amount on your pre-payment key each week Pre-payment by putting what you can afford on your key when you can How did you get on? This section gives you some answers and suggestions for thinking through the questions in Part 1. Thinking about what you want The sorts of factors that might be worth considering are: What are the payment options and which will suit her circumstances and personal preferences? Does she need to pay by direct debit? Will she need to pay a regular monthly amount? Is the tariff on the web site for online payments only? 6 Numeracy at Level 1

7 How reliable do you think the results offered by the web site are? Are they personalised to her particular circumstances? e.g. What information did she give about her gas and electricity consumption? The estimated savings will be based on information she has given. If she was not asked about her current consumption, they may not be very accurate. Are the prices used on the web site regularly updated? How impartial is the web site? Some web sites receive incentives from certain companies, so the way their site works out the best options may favour these companies! What are the terms and conditions of the options available? Are there any: discounts? bonuses? (If so, are these for a fixed period of time?) penalties? What quality of service will she get from different suppliers? It may not be worth changing suppliers if she is going to get a much worse standard of quality from the new supplier. It may cost her less money if she swapped, but might cause her considerably more stress if there are issues! For further information about factors to consider when choosing goods or suppliers, visit the following web sites: Money Made Clear (Financial Services Authority) Consumer Focus Advice/Helping_Househ olds/price_comparison_ser/p rice_comparison_ser.aspx 7 Numeracy at Level 1

8 Interpreting the results 1 The information is found in the sections of the web site summary extract shown by the arrows below. How much she would pay if she changed to the recommended option: 780 How much she could save if she made the change: 210 What she is paying now (according to this summary): Numeracy at Level 1

9 2 What recommendation did you offer to your friend? There is no one correct answer to this. Which option you recommend depends on personal preferences, e.g. how important you think price and service are. The sorts of things you might have considered are: The Gas UK Energy Online Saver 20 is the cheapest option (at an estimated annual cost of 780) and has quite a good service rating (4 stars). This rating is based on quite a few customer reviews (526 reviews). The AB Electric Websaver 2 offers less savings (an estimated annual cost of 810), but has a higher service review rating (5 stars). Fewer customers have given a review, though (327 reviews). You may have chosen other recommendations. You could talk to a tutor or a friend to check what they think, given the results from the cost comparison web site. 9 Numeracy at Level 1

Thinking about working out your friend s typical current annual electricity When you look at any individual bills for gas or electricity, you need to know what period of time they cover.

If so, I might think: I expect four quarterly bills in a year, so I could multiply the amounts by 4 : Electricity 105 105 4 = 420 In addition, though, you might want to consider the fact that at

10 Thinking about working out your friend s typical current annual electricity When you look at any individual bills for gas or electricity, you need to know what period of time they cover. So, considering the example electricity bill for 105: Is this a monthly bill? Probably not, as the amount is too high for a monthly bill. Is it a quarterly bill? If so, I might think: I expect four quarterly bills in a year, so I could multiply the amounts by 4 : Electricity = 420 In addition, though, you might want to consider the fact that at different times of year she will probably use different amounts of gas and electricity because of darker nights, colder weather, etc. If the 105 was for a summer bill, the winter ones will probably be higher so the total annual cost could well be considerably more than 420. If the 105 was for a winter bill, the annual cost could be quite a bit less than 420. To see how much difference this could make, consider the of possible bills over the year. Feb May Aug Nov TOTAL Electricity In this example the 105 is for a bill for the electricity used in winter months. Feb May Aug Nov TOTAL Electricity In this example, the 105 is for a bill for the electricity used in summer months. 10 Numeracy at Level 1

11 3 You might have filled in the table with responses like these. Payment method Regular monthly amount Multiply by 12 ( 12) How could you work out the annual? Monthly direct debit (amount of fuel used) Quarterly payment by cheque on receipt of bill Pre-payment by putting a regular amount on your pre-payment key each week. Pre-payment by putting what you can afford on your key when you can. Add up the amounts for the 12 payments to get an accurate amount. OR Multiply by 12 to get an approximate amount. Add up the amounts for the 4 payments to get an accurate amount. OR Multiply by 4 to get an approximate amount (see comments in the section above). Multiply by 52 (as there are 52 weeks in a year). ( 52) It will probably be quite difficult to know how much you re spending unless you try to remember to keep track of it as you go along. For more information about different payment methods and the advantages and disadvantages of each, see sections of the Money matters to me web site: Paying the bills Budgeting/Sub1/PayingTheBills.htm#DifferentWays 5 ways to pay (your bills) 11 Numeracy at Level 1

12 Part 2 Comparing options in detail When you look at your friend s bills in more detail, you realise that the original estimates offered by the web site weren t very accurate. They didn t take into account information about your friend s typical consumption. You work together to do a more detailed search on a cost comparison web site using your friend s circumstances. In Part 2 you will be working with this revised information and looking at your friend s electricity. 1 When you have a recommendation or list of options, you may want to compare the cost of different tariffs. A tariff tells you what different charges and rates you will be paying as part of your bill. When comparing tariffs it is useful to be able to identify the main differences between them. These are the key things that may affect which tariff you will choose. Look at the two tariffs below ( new tariff and current tariff ) and identify the main differences between them. Tip: You could print out the tariffs and use a highlighter pen to mark the differences between them. Recommended new tariff details: Gas None 6.45p 3.10p Up to kwh Electricity None 19.00p 10.30p Up to 500 kwh Discount: 15% 12 Numeracy at Level 1

Current tariff details: Gas None 6.55p 3.56p Up to 2 500 kwh Electricity None 23.5p 10.42p Up to 500 kwh Discount: None Note: What does kwh stand for? kwh is the abbreviation for kilowatt hour.

13 Current tariff details: Gas None 6.55p 3.56p Up to kwh Electricity None 23.5p 10.42p Up to 500 kwh Discount: None Note: What does kwh stand for? kwh is the abbreviation for kilowatt hour. This is the unit in which the energy is measured, and is the unit used by your utility company to charge you for the gas or electricity you have used. Check that you understand what the different elements of the payment tariff mean. You will find these on your gas or electricity bill, so it is useful to understand how they contribute to the amount you owe. Looking at electricity For the rest of this part of the assignment you are going to focus in particular on your friend s electricity. Let s look at the cost of electricity on the new tariff to illustrate the different elements shown as part of the tariff grid. 13 Numeracy at Level 1

14 Recommended new tariff details: Electricity None 19.00p 10.30p Up to 500 kwh The Standing charge is an amount you pay whether you use any gas or not. The Unit Rate 1 is the rate you pay for the electricity you use up to the number of kwh given. The Unit Rate 2 is the rate you pay for the rest of the electricity you use. Example On this particular tariff, there is no standing charge, so your friend will only pay for the electricity she uses. If she has used 1200 kwh of electricity: she would pay 19.00p for the first 2500 kwh ( Unit Rate 1 ) and pay 10.30p for the rest of the electricity she s used ( Unit Rate 2 ). 2 Work out what the cost for 1200 kwh of electricity would be on this tariff. If you were answering questions in the National Numeracy Test you would not be able to use a calculator. However when you are applying your skills to a real-life task and using real numbers it is often best to use a calculator especially for calculations like this. Note: Be careful about the units in this calculation the rate given in the tariff is in pence. How can you convert your answer to work out how much it is in pounds? Tip: How many pence will there be in each pound? If you want to check your answer to this question before you move onto the next question, look at page Numeracy at Level 1

15 3 Your friend s typical current electricity consumption in a year is: 1200 kwh. However, she has recently had repairs done to her boiler and the engineer who did these told her that it should improve her electricity consumption by about 20%. What is her new consumption likely to be? 4 You and your friend now have the following information for electricity tariffs and their. She asks you for your advice about which of two tariffs would be cheaper for her. Tariff 1: Energy Online Saver 20 Supplier Tariff Service rating Last price change Electric UK Energy Online Saver 20 **** 17/05/09 Customer reviews 625 reviews Electricity None 19.00p 10.3p Up to 500 kwh Tariff 2: Energy Online Saver Extra Supplier Tariff Service rating Last price change Customer reviews Electric UK Energy Online Saver Extra **** 17/05/ reviews Electricity 0.32 per day 6.6p - 15 Numeracy at Level 1

16 How much will it cost your friend for her revised amount of electricity using each of the two tariffs shown above? Tip: You might want to print out the two tariffs and highlight the relevant figures you need to use to make sure you use the right ones in your calculations. Thinking about the standing charge: If this is given as a rate per day. How can you work out how much it will be in a year? Tip: Think carefully about the units for your different calculations. Notice in particular that Unit Rates are given in pence (e.g. 6.6p per kwh). The Standing charge is given in pounds ( 0.32 per day). How accurately do you need to work out the to be able to decide which tariff might be better for her? Do you need to work out exactly what the electricity would cost on each tariff? Or will estimates be OK? Based on all the information you have, which tariff would you advise your friend to choose? 16 Numeracy at Level 1

17 How did you get on in Part 2? 1 The differences between the two tariffs shown are highlighted below. Recommended new tariff details: Gas None 6.45p 3.10p Up to kwh Electricity None 19.00p 10.30p Up to 500 kwh Discount: 15% Current tariff details: Gas None 6.55p 3.56p Up to 2500 kwh Electricity None 23.5p 10.42p Up to 500 kwh Discount: None You could summarise these differences, if you wanted to, by saying something like: The new tariff has lower unit rates than the current tariff. The new tariff offers a 15% discount. 17 Numeracy at Level 1

18 2 The cost of 1200 kwh of electricity on the new tariff would be: You might work this out something like this. The first 500 kwh of electricity will cost: p = 9500 pence => pence 100 = The rest of the electricity will be: = 700 kwh: p = 7210 pence => So the total cost for the electricity will be: = For further information about understanding electricity and gas consumption, visit the Money Matters to Me web site: Understanding electricity consumption Understand your home bills % reduction on a current consumption of 1200 kwh. 20% of 1200 is 240 kwh. So the reduced consumption will be = 960 kwh. 18 Numeracy at Level 1

19 There are a number of ways in which you might have worked out your calculations. Two examples are given below. Check that you came up with the same answer about your friend s new electricity consumption. Two examples of ways you might have worked out 20% are: Example 1: 10% of 1200 is 120 So 20% will be 240 Example 2: = = 240 If you would like more practice on working out percentage calculations (including using different ways to do these), try the resources on the Move On Learner Route. 4 Recommendation: Your friend might be better choosing Tariff 1. You don t need to work out the cost accurately. An estimate would be OK in fact the answer you get will only be an estimate anyway as you don t know yet exactly how much electricity your friend will actually use. Using the figures you have, the cost for 960 kwh over a year on the two tariffs would work out as: Tariff 1 around 140 (see the following page) Tariff 2 around 180 (see the following page) It looks like Tariff 1 will work out considerably cheaper for her, so unless she has other reasons for choosing an alternative (like those considered in Part 1) she would probably choose this tariff. You may have set out your calculations differently, but check to see if you have used the same information and arrived at the same conclusion. 19 Numeracy at Level 1

20 Tariff 1: Electricity None 19.00p 10.3p Up to 500 kwh The cost of 960 kwh would be: Standing charge None The first 500 kwh of electricity will cost: p = 9500 pence => The rest of the electricity will be = 400 kwh: p = 4120 pence => TOTAL Tariff 2: Electricity 0.32 per day 6.6p - The cost of 960 kwh on Tariff 2 would be: Standing charge per day = The 900 kwh of electricity are all charged at the same rate and will cost: p = 5940 pence => TOTAL Numeracy at Level 1

21 If you want more practice with reading tables and charts, working with decimals or calculating percentages, you can look at the resources and links on the Move On Maths Learner Route. Why not try out the Hot Topic on percentages? The skills you have practised in this assignment will help you to: plan how you might be able to reduce your expenditure research information about the of goods and services interpret information about goods and services and consider which are important to your circumstances compare using different payment options compare the cost of services under different tariffs. What next? If you want to gain a numeracy certificate, try a progress check or practice test on this route. If you have any skills gaps, work through the other resources to build your skills at this level in preparation to take the test. If you decide you would like a literacy certificate, try the mini-test on the English learner route to find the best level to start at. You can work through the resources on the route to build your skills in preparation for taking the test. Find out more about the National Certificates by visiting the guide at To find out about a financial capability qualification, go to 21 Numeracy at Level 1

22 Notes for tutors Financial Capability Framework D(g) 5 Ability to assess best buy in a variety of circumstances D(d) 4 Ability to check for accuracy... utility and other bills D(a) 4 Understand and compare different forms of payment Using the following skills from the Adult Numeracy Core Curriculum: HD1/L1.1 Extract numerical information from lists, tables, diagrams and simple charts MSS1/L1.1 Add, subtract, multiply and divide sums of money and record N1/L1.5 Add, subtract, multiply and divide decimals up to two decimal places MSS1/L1.7 Convert units of measure within the same system N1/L1.6 Multiply and divide decimals by 10 and 100 N2/L1.10 N2/L1.11 Find simple percentage increase and decrease Use a calculator to calculate efficiently using whole numbers, fractions, decimals and percentages 22 Numeracy at Level 1

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