To: Dr.

Andy Pennock From: Kelsey Sherman Date: November 5, 2012 Subject: Statistics Assignment 6 Scatter Plots and Line Graphs 1. Price of Residential Electricity and Number of Customers with an Ifit Line

Figure 1 compares the price of electricity for residential customers, in cents per kilowatt-hour, and the number of residential customers, in thousands, for each of the 50 states. The data used was taken from the U.S. Energy Information Administration, Detailed State Data for 2011. This data is released every year. This data was released on October 2, 2012. The x-axis represents the number of residential electricity customers, in thousands. The y-axis represents the price paid by residential electricity customers, in cents per kilowatt-hour. The number of residential customers in each state (x-axis) is the Independent variable because price does not usually change the demand for electricity. Electricity is a necessity. This being said, the price (y-axis) is the dependent variable. According to basic economic modeling, the price of electricity to residential customers should increase as the demand for electricity increases. The scatter plot and ifit line are intended to show the relationship between the number of residential electricity customers and the price paid by those customers per

kilowatt-hour in 2011. Theoretically, the more residential demand for electricity, the more residential customers should pay per kilowatt-hour. The scatter plot indicates that there is no real relationship between the number of customers and the price paid by those customers. This is demonstrated by the fact that a large number of the points that lie in the 0 to 2,000 residential customer, in thousands, region pay anywhere between $.07 and $.19 per kilowatt-hour. If there were a relationship, then, those states with only 0 to 2,000 residential customers, in thousands, would be paying less for electricity than those states with 8,000 to 10,000 residential customers, in thousands. Roughly speaking, the slope of the ifit line is slightly above zero or .19. If the number of residential customers was increased by 1,000, there would be little effect on the dependent variable, price. Its also important to note that 46 of the 51 states observed in this data set lie within the 0 to 6,000 customer, in thousands, range and also within the $.07 to $.19 per kilowatt-hour range. There are 5 outliers, Hawaii who has very few residential customers and pays nearly $.35 per kilowatt-hour for electricity. The remaining 4 states all have more than 6,000 customers, in thousands, and pay between $.11 and $.19 per kilowatthour. 2. Price of Residential Electricity and Number of Customers Changing Over Time

Every year, the U.S. Energy Information Administration releases a document entitled Electric Power Annual. The data used here was taken from the most recent release of Electric Power Annual which includes data thru 2010. Figure 2 also compares the price of electricity for residential consumers in cents per kilowatt-hour and the number of residential customers in millions but over a span of 11 years (1999 to 2010). The x-axis represents the years from 1999 to 2010. The left yaxis represents the price paid by residential consumers in cents per kilowatt-hour. The right y-axis represents the number of residential customers in millions. The aim of this graph is to demonstrate whether or not the demand for electricity and price of electricity changed over time. I would hypothesize that as the demand (number of customers) for electricity increases over time, that the price of electricity also increases. The general trend of these lines upholds my hypothesis that as the number of customers increases over time that the price of electricity increases. There are, however, a few exceptions. First, the price of electricity did not rise as much as the number of customers did, between 2002 and 2004. This accounts for the larger gap between the two lines during this time period. Also, Both the price of electricity and the number of customers did not change much between 2009 and 2010. The lines are relatively horizontal for that time period. Lastly, it is interesting to note that the relationship between price and number of customers in 1999 was opposite of what it is now. The relationship between average price and number of customers was inverted in 2000. This relationship has not inverted again since then. This change could be attributed to a steep growth in the number of residential electric customers.