Contact:  Judy Palnau (517) 241-3323

The Michigan Public Service Commission (MPSC) today released the “Michigan Energy Appraisal: Winter 2005/2006.”  The appraisal, published since 1978, reviews the projected prices and availability of energy in Michigan over the winter months.

In addition to the high cost of gasoline and large electric bills, due to the hot summer this year, home heating bills are also expected to show sharp increases this coming winter. Most notably, natural gas prices are expected to be even higher than preliminary estimates suggested.  Residential natural gas customers in Michigan this year can expect monthly heating bills to average 46 percent above last winter. Natural gas prices are expected to average $12.30 per Mcf over the winter months this year compared to $8.42 last winter.  Michigan customers are still paying less than prices seen in other parts of the country and historically have had lower prices than other Midwest states.  In New England, natural gas prices for residential customers could go as high as $20 per Mcf.  The energy supply system remains fragile and it will be months before the nation’s energy supply returns to more normal operations following the damage from Hurricanes Katrina and Rita.

Natural Gas – The record natural gas prices this winter are largely due to both the lingering effects of Hurricane Ivan last year and this year’s Hurricanes Katrina and Rita. Substantial disruption of natural gas production in the Gulf of Mexico has reduced supply, driving up prices. There is some uncertainty on the prospect for even higher prices depending on how long it might take to return natural gas production from the Gulf of Mexico to normal levels following the hurricanes.   Natural gas sales in Michigan for 2005 are projected to be 877.9 Bcf, an increase of one percent over 2004.

Electricity – Michigan’s electricity sales are expected to increase by 2.9 percent in 2005, compared to the slight decline in 2004.  The increase in sales is due to the substantially warmer than normal weather this past summer.  Reduction in industrial sales due to reduced economic activity offset part of the increase. No supply shortages or transmission constraints are expected to affect Michigan’s utilities’ ability to meet winter peak electric demand.

Petroleum – Hurricanes Katrina and Rita damaged oil production facilities and refineries in the Gulf Coast.  As a result, 80 percent of normal daily oil production, or 1.2 million barrels remain shut-in.  As of October 6, 2005, a total of three million barrels of refining capacity remains shut down, about 15 percent of the nation’s refining capacity.  U.S. oil supply will remain tight and prices up until production and refineries resume more normal operations.

Motor Gasoline – Gasoline prices in Michigan reached an all time record high the week before the Labor Day weekend and national gasoline prices are expected to range in the $2.50s to $2.60s for all of next year. Due to the high prices and other factors, gasoline use in Michigan is expected to decrease by 1.7 percent. Assuming prices remain at September’s average for the remainder of the year, Michigan businesses and motorists will pay $2.4 billion more this year than last year for gasoline, a 26 percent increase.

Distillate Fuel Oil -  Demand is expected to decrease 0.1 percent in 2005.  Based on Midwest diesel price increases in the last year, should these prices persist for a year, the added cost for diesel fuel in Michigan would total about $607 million.

Heating Bills   -This winter the average monthly bill for residential natural gas use will increase an estimated 46 percent over last winter, assuming normal temperatures, increasing from $128 to $187.  Residential users of propane and heating oil can also anticipate significant increases in heating bills.  In March of 2005, the average residential price of  #2 home heating oil was $2.00 per gallon, excluding the 4 percent sales tax.  As of October 3, 2005, this average has increased to $2.75 per gallon, an increase of 37 percent.  The cost of residential propane has not increased to the same degree.  In March of 2005, a gallon of propane for residential customers was $1.68, excluding sales tax.  As of October 3, 2005, this average has increased to $1.80 per gallon, an increase of 7.1 percent.

For more information on how to hold down heating bills by energy efficiency investments and for low income consumers who need assistance with their heating bills see:  http://michigan.gov/bewinterwise

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.