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MPSC Issues 2012-2013 Winter Energy Appraisal

Contact:  Judy Palnau, 517-241-3323
Agency:  Michigan Public Service Commission

October 26, 2012 - The Michigan Public Service Commission (MPSC) today released the "Michigan Energy Appraisal: Winter 2012/2013." The appraisal, published since 1978, reviews the projected prices and availability of energy in Michigan over the winter months.

Energy supplies in Michigan will be adequate to meet anticipated demand this winter. Overall annual demand for natural gas, electricity, distillates and propane is projected to increase, assuming a return to normal weather for the 2012-2013 winter season. Motor gasoline consumption, however, is expected to decrease slightly as a result of higher gasoline prices and market volatility. Assuming normal weather and increased consumption compared to last winter's record warmth, Michigan residents using natural gas are likely to see a slight increase in their average winter heating bills. Higher bills will be due to increased consumption, as the average cost of natural gas to residential customers has decreased by 7 percent.

Electricity - In 2012, Michigan's total electricity sales are expected to increase 1.4 percent over 2011 sales. This growth is due to higher consumption among commercial and industrial customers as a result of high summer temperatures and steady industrial production growth. Industrial electricity usage is projected to increase by 3.3 percent, attributed largely to the resurgence of the auto industry. In contrast, overall residential electricity use is expected to remain relatively flat due to the counter balancing effects of a mild winter season and record summer heat.

Natural Gas - Assuming a return to normal weather, total natural gas sales in Michigan are projected to increase 9.9 percent to 823 billion cubic feet (Bcf), over 2011 sales. This increase is largely attributable to use for electric power generation, which has continued an upward trend for the past three years. Natural gas storage levels are projected to be above the five-year average and prices are expected to average $9.13 per thousand cubic feet (Mcf) this winter, a 7 percent decrease from last year.

Petroleum - The Energy Information Administration projects the price of West Texas Intermediate (WTI) to average $93 per barrel and largely remain at this level throughout the rest of the year. This increase is expected to contribute to a decline in U.S. liquid fuel consumption of 280,000 barrels per day (bbl/d) in 2012. Domestic crude oil production is expected to continue its upward trajectory due in part to increased oil-drilling, specifically explorations in developing shale formations. These production increases have helped to reduce net imports of liquid fuels from 57 percent of total U.S. consumption in 2008 to just 41 percent in 2012.

Motor Gasoline - Gasoline sales in Michigan are projected to decrease by 0.3 percent in 2012 primarily due to higher gasoline prices and market volatility. Higher crude oil prices, refinery outages, infrastructure disruptions, and the impacts of Hurricane Isaac all contributed to higher gasoline prices during the spring and summer. Prices began to decline recently as refiners transitioned from summer‐grade to winter‐grade gasoline specifications. This has continued with reductions to the price of crude oil resulting in lower prices across the US, with the Midwest seeing the largest one-week decrease in gasoline prices since November 3, 2008. According to AAA, the average price for a gallon of regular unleaded gasoline in Michigan was $3.47, as of October 24, 43 cents lower than it was a month ago.

Distillate Fuel Oil - Total distillate sales in Michigan are projected to increase by 0.5 percent to 1.04 billion gallons in 2012. Demand has remained relatively flat since 2010, but modest gains are expected to place 2012 levels 8.6 percent above those seen in 2009. Much of the rebound can be attributed to industrial production growth which increased an average of 6.6 percent year-over-year for the first two quarters of 2012.

Propane - As a result of an unseasonably warm winter in 2011-2012, propane demand is projected to be 12.9 percent above last year for this heating season, assuming a return to normal weather. Propane prices began the winter heating season almost 20 percent below last year due to higher than average inventories and increased production. In Michigan, about 9 percent of households heat with propane, more than any other state in the country.

Winter Heating Bills - Assuming normal weather, it is expected that residential heating bills for natural gas will be slightly higher this winter due to increased consumption counterbalancing the effects of lower prices. Normal weather means increased consumption of heating fuels compared to last winter, which was 20 percent below normal. Customers using propane, however, are likely to see little movement in their heating bills, as a significant drop in prices will offset higher usage. As of October 1, the average price of residential propane price was $1.97 per gallon, 44 cents below the same time last year.

In Michigan, 77 percent of households heat with natural gas; 9 percent use propane; 8 percent use electricity; 2 percent use heating oil; and 4 percent use other fuels.

The Michigan Energy Appraisal is prepared every six months. The Energy Appraisal is available on the Commission's website at: The MPSC is an agency within the Department of Licensing and Regulatory Affairs.

The MPSC is an agency within the Department of Licensing and Regulatory Affairs.

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