Michigan: Natural gas rates to remain low even amid high demand; heating oil, propane also starting the season at lower prices
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FOR IMMEDIATE RELEASE   Nov. 18, 2019

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LANSING, Mich. — Natural gas use is likely to increase this winter while use of propane, gasoline, distillates and electricity is expected to decline owing to more normal weather patterns and a slowing in the industrial sector, according to the Michigan Public Service Commission's annual Winter Energy Appraisal.

Demand for gasoline is expected to decline by about 0.5 percent in 2019, and demand for distillates — most of which are used to produce diesel fuel — is expected to fall for the first time since 2015.

For the more than 75 percent of homeowners who use natural gas for heat, costs are expected to decline because of lower natural gas prices compared to last year, even as demand for natural gas across all sectors is projected to rise 2.7 percent.

Demand for propane is expected to drop by more than 8 percent, with prices significantly lower than last year. Heating oil prices also are starting out the season considerably lower than last year.

Here's the outlook by fuel category:

NATURAL GAS
  • Key takeaway: The rise in consumption comes after a warmer than normal summer and the additional natural gas use during the polar vortex in January. Production from Michigan wells is declining as they appear to be reaching the end of their economic life.
  • Demand: Projected to increase 2.7 percent
  • Supply: Inventories are on par with the five-year average.
  • Cost: The fuel cost portion of natural gas bills are expected to be about 8 percent lower, owing to the past year's lower gas prices holding steady heading into the winter.

PROPANE
  • Key takeaway: Supplies appear abundant and prices unusually low.
  • Demand: Usage is expected to decline year over year by 8.3 percent, mainly because of unusually high demand in 2018. On a seasonal bases, use is expected to decrease 2.8 percent, assuming normal winter weather.
  • Supply: U.S. inventories are 19 percent above last year, and near the five-year average in the Midwest.
  • Prices: Retail propane was uncharacteristically stable in winter 2018-2019 and 5 percent lower than the year before. Wholesale prices heading into this year's heating season are 40 cents lower than last year, with the price at $1.63 a gallon the week of Nov. 4, 2019.

MOTOR GASOLINE
  • Key takeaway: Changing course from the Summer Energy Appraisal, gasoline sales are expected to decline slightly in 2019 amid weakening sales across the region that includes Michigan and five other states.
  • Demand: A 0.5 percent decline in 2019 is expected to be the first since 2012.
  • Supply: Regional gas production is projected to increase 1.6 percent, but inventories are nearly identical to 2018.
  • Prices: Prices as of Nov. 7, 2019, averaged $2.57 statewide, down 10 cents a gallon year over year. The Midwest is expected to average $2.46 a gallon in 2019 and $2.52 a gallon in 2020.

ELECTRICITY
  • Key takeaway: Total electric sales for 2019 are expected to decline across the residential, commercial and industrial sectors.
  • Demand: Total sales expected to decline 3 percent, with drops of 2.6 percent in residential, 3.3 percent in commercial and 3.2 percent in industrial.
  • Supply: No supply shortages or transmission constraints are anticipated.
  • Prices: Year-over-year changes can vary significantly by utility. DTE Electric Co.'s prices were 10.4 percent higher in 2019 than the year before, while Consumers Energy's prices were 1.2 percent higher. Areas of the central and western Upper Peninsula continue to pay the highest rates in the state.

DISTILLATE FUELS
  • Key takeaway: Sales are expected to decline for the first time since 2015, in part from a decline in industrial production that relies on trucking and rail transportation.
  • Demand: 1.2 percent decline in 2019.
  • Supply: Regional refineries are expected to see only a 0.3 percent decline in production from 2018. National inventories are about 4 million barrels below the same time last year.
  • Prices: On-highway diesel fuel prices are expected to be average $3.05, 13 cents per gallon lower than 2018. Heating oil on Nov. 4, 2019, was $2.60, 36 cents lower than the year before.

Among significant developments in the state's energy outlook:
  • In October, Gov. Gretchen Whitmer and the MPSC launched MI Power Grid, an effort to guide Michigan residents and businesses through the state's transition to key clean energy. The multi-year effort will emphasize customer engagement, integration of emerging technologies and optimization of grid performance and investments.
  • The MPSC release a Statewide Energy Assessment in September to Gov. Whitmer, who requested it after the polar vortex energy emergency in Michigan in January. The assessment found that the state has adequate resources to meet demand but that there is work to be done to reduce risks from threats including abnormal weather, cyber-attacks and changing electricity supplies.

Read the full Michigan Winter Energy Appraisal by clicking here.

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For help with heating bills or energy self-sufficiency, nine agencies statewide have been awarded grants through Michigan Energy Assistance Program (MEAP). For information about the Home Heating credit, click here.

For help in weatherizing homes to cut energy costs, click here.

For information about the MPSC, visit www.Michigan.gov/MPSC, sign up for one of its listservs, or follow the Commission on Twitter.

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