October 21, 2002

The Michigan Public Service Commission (MPSC) today released the report “Michigan Energy Appraisal: Winter 2002/2003."  The appraisal reviews the projected prices and availability of energy in Michigan over the winter months.

Winter energy heating bills in Michigan may show some increases compared to last winter should Michigan see a return to normal winter temperatures after last winter’s 9 percent warmer than normal weather.  Natural gas, which is used to heat 78 percent of Michigan homes, is not expected to show significant changes in price this winter.  While usage and bills would go up with a return to normal winter weather, the National Weather Service has suggested a higher probability of warmer and dryer weather for the upper Midwest over the next six months.  Michigan has seen warmer than normal weather in four of the last five winters. The increases in residential heating bills in Michigan are expected to be less than the current national projections by the Energy Information Administration.

Electricity – Michigan’s electricity sales are expected to grow about 2.4 percent in 2002, compared to the 1.0 percent decline seen in 2001.  Warmer-than-normal weather this summer contributed to near record peak demands and higher electricity sales, especially in June and July.  New generating units and increased transmission capacity continue to im­prove the outlook for electricity supply in Michigan.  Prices for residential customers of Detroit Edison and Consumer Energy remain unchanged under a freeze enacted as part of the electric restructuring laws.

Natural Gas– Michigan’s natural gas deliveries for year 2002 are expected to increase about 4.8 percent, following last year’s 3 percent decline.  Consumption was down this past winter due to weather that was about 9 percent warmer than normal.  As a result, gas storage levels remained very high and will contribute to reducing imports this year. While the price of gas is expected to show little change, a return to normal winter weather will increase consumption about 9 percent, which in turn will lead to higher winter heating bills than last year.

Petroleum – Crude oil prices are near $30 per barrel up $3.50 per barrel from year ago levels and up about $10 from the low point seen in January 2002.  This has resulted in higher costs for petroleum products in general. The increase in crude oil cost has been caused by an OPEC decision to not increase production quotas at their September meeting, concerns about the potential for military action against Iraq and rising world oil demand. As was noted in the Summer Appraisal, “If production is not increased and demand continues to rise, oil prices may increase to nearly $30 per barrel.”

Motor Gasoline – While showing some significant swings week to week, Michigan’s gasoline prices overall were more stable this summer compared to recent years, averaging about $1.40 per gallon from April through September.  According to AAA of Michigan, gasoline prices averaged $1.55 on October 21, 2002. Assuming no major disruptions in the petroleum markets, prices are expected to remain near the $1.50 level through the winter.

Distillate Fuel Oil - The average residential price of home heating oil in Michigan was $1.24 per gallon excluding sales tax on October 21, 2002.  A year ago the price was $1.25, however by the spring of 2002 prices had declined to an average of $1.07.  A return to normal weather this year would increase usage by about 9 percent, and when coupled with the expected prices increases could result in heating bills approximately 25 percent higher than last winter for a typical home.

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The Michigan Energy Appraisal is prepared every six months.  Copies of the report can be obtained by contacting the Michigan Public Service Commission, Executive Secretary Division, P.O. Box 30221, Lansing, MI 48909, or by calling (517) 241-6175, or fax (517) 241-6101.  The Energy Appraisal is also available on the World Wide Web at: http://cis.state.mi.us/mpsc/reports/energy. 

The MPSC is an agency within the Department of Consumer & Industry Services.