Natural gas wellhead prices will likely remain in the $5-6/Mcf range for the remainder of the year according to an updated report authored by the Michigan Public Service Commission (MPSC). The projection marks a more than 30% increase over the average price that prevailed throughout 2000 and 2001 of $3.87/Mcf.
“Persistently high natural gas prices and historically low storage levels have combined to thrust natural gas into the spotlight,” the MPSC said in a recently updated report released on gas supply and price. The report cited low storage levels, rapid depletion of low cost supplies and increasing demand — particularly for electricity generation — as contributors to the high prices.
“Unfortunately, based on this report, Michigan’s natural gas customers, like those across the country, should prepare now for price increases,” said MPSC Chairman Laura Chappelle. “Actions taken now — such as adding insulation, conserving energy and using energy-efficient appliances — can help reduce gas bills.”
The study also found that higher wellhead prices faced by Michigan’s utilities are beginning to trickle down to residential customers. A comparison of the prices charged by Michigan’s four largest natural gas utilities shows that price increases from July 2002 to July 2003 have ranged from 13.5% to 57.4%. “When other charges are factored in — such as distribution and customer charges — estimates indicate that residential customers of these four utilities could pay a total of $53 to $172 more to heat their homes during the upcoming winter months than they did last winter,” the commission said in the report.
At 921 Bcf in 2002, Michigan is the sixth largest natural gas consuming state, accounting for 4.3% of U.S. consumption. Nearly 40% of the natural gas consumed in Michigan is used by the residential sector, primarily for home heating purposes, the commission said. The report found that over 78% of homes in the state are heated with natural gas, trailing only Utah and Illinois in terms of the percentage of households with natural gas as the primary heating fuel.
In addition, Michigan ranks among the top 10 states in total natural gas consumption by the commercial, industrial and electric generation sectors. It is also the twelfth largest natural gas producing state, accounting for little more than 1% of U.S. production. The report showed that the amount of gas consumed in Michigan is roughly four times higher than the amount of gas produced in the state, noting that production in Michigan peaked at 280 Bcf in 1997 and has since declined to 215 Bcf in 2002.
The MPSC said it is holding a public hearing at 9 a.m. on July 22 at its Lansing office to enhance public awareness of natural gas price increases and to discuss steps consumers can take to mitigate the increases.
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