MPSC Issues 2013-2014 Winter Energy Appraisal

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

 

October 9, 2013 - The Michigan Public Service Commission (MPSC) today released the "Michigan Energy Appraisal: Winter 2013/2014." 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 and electricity are expected to decrease in 2013 as a result of a mild summer that was 12 percent cooler than normal. Motor gasoline demand is also expected to experience a decrease due to increased vehicle fuel efficiency and sustained high gasoline prices. In contrast, diesel fuel demand is expected to rise from a growth in industrial production and a greater use of truck and rail transport. Lastly, assuming a return to normal weather for the 2013-2014 heating season, propane use is expected to increase, marking a return to historical demand levels.

Electricity - Michigan's total electricity sales in 2013 are expected to decrease by half a percent from 2012 sales, assuming normal weather conditions. This decrease is due to lower demand in the residential and commercial sectors resulting from mild summer temperatures that were 12 percent cooler than normal. Drops in demand are projected to be counterbalanced, however, by steady increases in use among industrial customers. Industrial electricity usage is projected to increase by nearly one percent, fueled by increased production in the auto sector.

Natural Gas - Total natural gas sales in Michigan are projected to decrease 3.8 percent from 2012 sales to 746 Bcf (billion cubic feet) assuming normal weather. This decrease is primarily a result of reduced demand in the electric power sector resulting from a cool summer that was 12 percent below normal. All other sectors are expected to see increased demand in calendar year 2013. The weighted average price for residential customers of all regulated utilities in Michigan over the winter season (Nov. - Mar.) is projected to be $8.08/Mcf (thousand cubic feet), representing a 6.2 percent decrease in natural gas prices from last year.

Petroleum - The EIA projects West Texas Intermediate (WTI) crude oil prices to average $101 per barrel during the fourth quarter of 2013 and $96 per barrel during 2014. Crude prices at this level are expected to contribute to a decline in U.S. liquid fuel consumption in 2014. Domestic crude oil production is expected to continue its upward trajectory due in part to increased oil-drilling, specifically exploration in developing shale formations. Domestic production reached the highest level in two decades in 2013 with Texas and North Dakota as the top producing states.

Motor Gasoline - Gasoline sales in Michigan are projected to decrease by 0.7 percent in 2013 due primarily to higher fuel efficiency among the vehicle fleet and changes in consumer behavior resulting from sustained high gasoline prices. In addition to the cost of crude, refinery outages (both planned and unplanned) have put upward pressure on regular unleaded gasoline prices which have not dipped below $3.20/gallon since January, 2013. With the exception of 2010, gasoline sales in Michigan have decreased every year since 2004, resulting in a 14.5 percent net reduction in demand.

Distillate Fuel Oil - Total distillate sales in Michigan are projected to increase by 1 percent to 1.04 billion gallons in 2013. Demand has decreased for the past two years, but increased industrial production is expected to boost levels to a three-year high. Industrial production growth increased an average of 4.6 percent year-over-year for the first two quarters of 2013.

Propane - The upcoming 2013-2014 heating season (November - March) is projected to see an increase in propane use of 5.7 percent over last year, assuming normal weather. Colder than normal temperatures at the end of the 2012-2013 heating season caused propane use to rebound closer to historical demand volumes after two previous mild winters. This upcoming season would be the second consecutive year of increased demand, although propane demand has been on a long-term downward trajectory. An estimated 9 percent of households in Michigan use propane as the primary space heating fuel.

Winter Heating Bills - 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. Normal weather means increased consumption of heating fuels compared to last winter, which was 4 percent warmer than normal. As of October 7, 2013, the average price of residential propane price was $1.90 per gallon, 4 cents below the same time last year. The cost of these fuels may vary from projections over the upcoming winter months as they are driven by dynamic supply and demand conditions such as weather.

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 www.michigan.gov/energy. 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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