May 5, 2006

The Michigan Public Service Commission (MPSC) today released the “Michigan Energy Appraisal: Summer 2006.”  The appraisal, published since 1978, reviews the projected prices and availability of energy in Michigan over the summer months.

High gasoline prices will continue to place a burden on Michigan’s citizens and business this summer, affecting the state’s economy and driving down gasoline demand by an estimated 2.1 percent.  If Michigan follows the Midwest trend projected by the Energy Information Administration, gasoline prices should peak in May and see a downward trend through the balance of the year.  The cyclical retail gasoline price swings are expected to continue, which could in the near term, mask the downward trend.   This assumes no major oil disruption or devastating hurricanes.  Power supplies should be adequate to meet the peak summer air conditioning season.   If temperatures are normal, electric usage should be down from last summer when Michigan experienced very hot weather.  Natural gas prices have moderated; however they are not expected to fall to levels seen prior to last winter.

Electricity – This summer’s combined peak demand in the Detroit Edison and Consumers Energy service areas are projected to total 21,365 MW.  This demand will be 722 MW above their in-state generating capacity of 19,250 MW, so purchases of power are being made to assure adequate reserves.

Natural Gas – Natural gas prices dropped as supply improved following the recovery of Gulf Coast production after last year’s hurricanes.  Demand for natural gas in Michigan for 2006 is expected to increase by only 0.8 percent, following the 5.5 percent increase seen in 2005.   This is largely due to the much warmer than normal weather seen during part of this year and the continued sluggish Michigan economy.

Petroleum – Crude oil prices are reaching record high levels in futures markets in the U.S. and abroad.  The run‑up in prices reflects supply concerns given the political tension over Iran’s resumption of its nuclear power program and the potential for economic sanctions from the United Nations, the continued unrest in Nigeria where more than 500,000 barrels of production is shut‑in due to attacks by antigovernment forces, and Venezuela’s added taxes and royalty payments on foreign oil producers.

Motor Gasoline– High gasoline prices in Michigan are expected to continue to depress demand again this year.   For 2006, total gasoline consumption is projected to fall 2.1 percent from last year’s levels.  This is on top of the 2.2 percent decline seen in 2005.  These are the largest annual declines in gasoline usage seen in Michigan in over 20 years.  For more information on Michigan gasoline prices see:  michigan.gov/gasprices

Distillate Fuel Oil -  For 2006, total distillate sales are expected to decline 1.7 percent to just over 1.18 billion gallons. This decline can be attributed to the ailing manufacturing sector, the rising costs associated with diesel fuel, and the significantly warmer than normal weather seen in the first four months of this year.   Residential heating oil prices began the heating season in October of 2005 at $2.75 per gallon, but ended the season at $2.33 by the end of March 2006.  Much of this decrease can be related to the warmer than normal winter heating season and the resulting decline in demand. 

Energy for the Future – On April 6, 2006, Governor Jennifer M. Granholm issued an executive directive calling for J. Peter Lark, chairman of the Public Service Commission, to develop a comprehensive energy plan for the state of Michigan.  The plan will outline ways to provide affordable, reliable, safe, and clean electricity for citizens and businesses and will include recommendations for the appropriate use and application of energy efficiency, and alternative and renewable energy technologies.

The Michigan Energy Appraisal is prepared every six months.  The Energy Appraisal is available on the Commission’s Web site at: http://www.dleg.state.mi.us/mpsc/reports/energy.  The MPSC is an agency within the Department of Labor & Economic Growth.

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