The Michigan Public Service Commission (MPSC) today released the "Michigan Energy Appraisal: Winter 2009-2010."  The appraisal, published since 1978, reviews the projected prices and availability of energy in Michigan over the winter months.

The outlook shows that overall energy supplies in Michigan this winter will be more than adequate to meet anticipated demand.  Home heating costs are also expected to be lower for many households this winter, as prices have fallen from last year. In addition, Michigan is expected to see normal or slightly warmer than normal temperatures this winter according to the Climate Prediction Center¹ of NOAA.  Last winter was 4.8 percent colder than normal, so a return to normal temperatures will directly translate into reduced consumption and a further reduction in heating bills. 

Michigan residential natural gas prices are projected to average 12 percent lower than last winter, and if the temperatures this winter are normal, natural gas heating bills could be down as much as 16 percent.  The average price for the winter heating months (November through March) is expected to be $10.04 per thousand cubic feet (Mcf).  One factor that could increase prices above these levels involves natural gas rate cases pending before the MPSC.  Consumers Energy could implement a rate increase as soon as December 2009; MichCon could raise their rates in January 2010, and MGU in February 2010.  These potential increases are based on the utilities' ability to self-implement rate increases pending a final order of the Commission.

On October 5, 2009 residential propane prices in Michigan averaged $1.75 per gallon, down 24 percent from last winter's average price.  Residential #2 heating oil prices averaged $2.32 per gallon on October 5, 2009, up 9 percent from last winter's average price.

In Michigan, 78 percent of homes are heated with natural gas, 9 percent with propane, 7 percent with electricity, 4 percent with #2 heating oil and 2 percent with another fuel or none.

Electricity - Michigan's electricity sales are expected to decrease by 4.3 percent in 2009 due to a reduction in electricity demand in all sectors; residential, commercial and industrial.  Weather remains a major determinant of summer electricity demand.  In 2009, Michigan had one of the coolest summers on record, greatly reducing electric demand for air-conditioning.  No supply shortages or transmission constraints are expected to impact the ability of Michigan utilities to meet winter peak electric demand, which is normally at least 25 percent lower than the summer peak demand.

Natural Gas - Total natural gas sales in Michigan for 2009 are projected to be 690 billion cubic feet (Bcf), a 10.1 percent fall from 2008.  These projections assume normal weather that would decrease demand over last winter, which was 4.8 percent colder than normal.  Natural gas storage levels are projected to be 660 Bcf in October 2009, which means Michigan's storage capacity will be completely filled.  This should be sufficient to meet anticipated demand for the coming winter.  Natural gas prices are expected to average $10.04 per Mcf this winter, though prices could vary based on market conditions and rate cases before the Commission.

Petroleum - The summer of 2009 saw more stable petroleum markets than 2008.  Crude oil prices fell dramatically at the end of the driving season in 2008.  Global recession cut demand for oil, leading to prices as low as almost $34 per barrel by January 2009.   Prices have since risen and have been fluctuating at around $70 per barrel for the past month.  It is expected that the price of crude oil will remain relatively flat in 2010, depending largely on the global economic outlook. 

Motor Gasoline - The slide in the price of crude oil also brought down the price of gasoline.  From a record high on July 17, 2008 averaging $4.21 per gallon, gasoline prices have receded and on October 8, 2009 the average cost of a gallon of regular gasoline in Michigan was $2.45, 96 cents below the price a year ago and $1.76 below the record high. Despite lower prices, the recession continues to impact gasoline sales in Michigan, which are projected to continue their decline, dropping 2 percent from 2008.  This will mark the sixth straight year of declining gasoline sales in the state.  Projected sales for 2009 are 4,265 million gallons, down from 4,352.9 million gallons in 2008.  The last year in which gasoline use increased was 2004. 

For 2009, distillate sales in Michigan are projected to decrease by 11.5 percent to 977 million gallons.  The three principal factors affecting distillate usage in Michigan are reductions in industrial production, price, and winter weather; of these, industrial production is the biggest determinant.  Diesel fuel accounts for approximately 93 percent of the total distillate consumption on average.  Diesel fuel sales should decrease 12.9 percent over the level seen in 2008.

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 Energy, Labor & Economic Growth.