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Cheaper heat this winter?

State regulator bucks national trend with forecast

October 10, 2013
JOHN PEPIN - Journal Staff Writer (jpepin@miningjournal.net) , The Mining Journal

MARQUETTE - Despite federal forecasts of higher home heating costs nationally, residential heating bills in Michigan are predicted to be lower this winter, according to a new appraisal released Wednesday by the Michigan Public Service Commission.

The commission - which regulates natural gas, electric and telephone utilities in Michigan - has published its winter energy appraisal since 1978, projecting prices and the availability of energy across the state.

"Assuming normal weather, it is expected that residential heating bills for natural gas, propane and heating oil will be lower this winter due to lower prices counterbalancing the effects of increased consumption," the forecast said. "Normal weather means increased consumption of heating fuels compared to last winter, which was 4 percent warmer than normal."

Article Photos

Harvey Oil Company employee Pat Connolly attaches a hose to a propane tank to fill it up Wednesday in Negaunee Township. Propane costs are lower now than last year, but prices could rise this winter season. (Journal photo by Adelle Whitefoot)

The appraisal said fuel costs may vary from projections over the winter because they are driven by dynamic supply and demand conditions, including weather. Overall, energy supplies in Michigan this winter are expected to be able to meet consumer demand, according to the appraisal.

Michigan's heating costs won't increase as predicted across much of the nation because the majority of residents use natural gas to heat their homes and traditionally natural gas prices in Michigan have been cheaper than the national average, commission spokeswoman Judy Palnau said.

Those cheaper prices are the result of greater underground storage capacity in the state, Palnau said, as well as a well developed infrastucture for distribution.

Palnau said statewide average natural gas prices this winter are expected to be the lowest in more than a decade.

"We haven't seen this since the winter of '02-'03," she said.

Seventy-seven percent of Michigan's households heat their homes with natural gas.

The weighted average price for residential customers of all regulated utilities in Michigan from November to March is predicted to be 6.2 percent lower for natural gas than it was last winter, the appraisal said.

Commission Chairman John Quackenbush said over time, residents have undertaken energy efficiency measures in their homes, which have helped to reduce consumption and the cost of heating bills.

For 2013, overall annual demand for natural gas and electricity was expected to decrease because of a mild summer, which was 12 percent cooler than normal.

Roughly 8 percent of Michigan households use electricity to heat their homes, 2 percent use heating oil and 4 percent use other fuels.

About 9 percent of households use propane for heating.

Assuming normal temperatures for the 2013-14 heating season, propane use is expected to increase by 5.7 percent, marking a return to historical demand levels.

As of Monday, the average price of residential propane was $1.90 per gallon. That price is 4 cents cheaper than last year.

However, Quackenbush said despite the current lower price, the cost of propane could increase this winter.

"Propane prices are down to a lesser degree than (natural) gas prices are down," Quackenbush said. "In their instance, the return to normal volumes will mean increases in total bill likely for propane customers."

Propane customers buy in bulk and the cost is time dependent.

"Your bill is kind of dictated by when you place your order," Quackenbush said.

Following two mild winters, colder than normal temperatures at the end of last winter caused propane to rebound closer to historical demand, the appraisal said.

"This upcoming season would be the second consecutive year of increased demand, although propane demand has been on a long-term downward trajectory," the report said.

Quackenbush said natural gas utilities are working to extend their networks to more areas, offering more choice to consumers.

"There's a group of propane customers that don't have a gas main running outside their homes yet and utilities are trying to identify areas, towns that are close enough to existing service - but don't yet have service - that they can extend to and then give those customers an opportunity to switch to natural gas service because it's definitely more economical at current prices," Quackenbush said.

"There seems to be a path that natural gas, for quite a number of years in the future, will provide a lower total bill than a propane service will. So customers are seeing advantages to switching and utilities are making plans - it's kind of community-by-community - but they are actually making those transitions."

The mission of the commission - whose three members are appointed by the governor to serve staggered 6-year terms - is "to grow Michigan's economy and enhance the quality of life of its communities by assuring safe and reliable energy, telecommunications and transportation services at reasonable rates."

John Pepin can be reached at 906-228-2500, ext. 206.

 
 

 

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