MPSC Issues Summer 2009 Energy Appraisal

Contact: Judy Palnau (517) 241-3323

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

The demand for energy in Michigan is expected to continue its decline in 2009.  These declines are due to the continuing reduction in the level of economic activity in the state and the nation. Should the economy begin to show resumed growth in the later part of 2009, energy demand may begin to pick up, which would serve to offset the degree of the declines shown in these forecasts. Given the anticipated demand levels, no supply issues are anticipated; petroleum and natural gas prices are expected to remain relatively stable. It should be noted that the uncertainty of the economy also translates into a higher level of uncertainty in these projections which are based on the future course of the state's economy.

Electricity - The availability of electricity over the summer is assured given the anticipated decline in projected sales. Electricity prices could increase depending on two rate cases currently pending action by the Michigan Public Service Commission.  Both Detroit Edison and Consumers Energy have requested significant increases in electricity prices.  These increases average 8.3 percent across all customer classes, with the largest increase having been requested for the rates charged to residential customers. 

Natural Gas - Lower natural gas prices, and lower demand, are also expected to ensure sufficient supply and lower heating costs for the coming winter compared to last year. Total annual natural gas sales in Michigan for 2009 are projected to be 767.1 billion cubic feet (Bcf), a decrease of 0.1 percent over 2008.  This is based on normal weather for the remainder of the year.  Despite the colder than normal weather during the first quarter of 2009, the lower level of economic activity has served as an offset, holding demand essentially flat.

Petroleum - Increases in surplus world oil production capacity can more than offset most anticipated supply problems, which means gasoline and other petroleum product prices should remain near current levels for the balance of the year.  World oil demand is expected to decrease in 2009 by 1.35 million barrels per day (m/b/d) to a total of 85.8 m/b/d.  This projection is from the Energy Information Administration's April 2009 "Short-Term Energy Outlook."  Global oil prices fell precipitously in the last half of 2008, as recessionary effects caused oil demand to fall. The price of crude oil dropped from a high of $137 per barrel in July of 2008 to a low near $36 in December.  Currently crude oil prices are approximately $50 per barrel.

Motor Gasoline - For 2009, gasoline consumption is projected to continue its decline, falling an additional 4.1 percent from 2008 levels, which would be the fifth consecutive year of declining demand.  Total gasoline use in Michigan is projected to total 4.1 billion gallons for 2009. Gasoline use, based on the 2009 projection, will be down nearly 762 million gallons since 2004, the last year in which gasoline demand increased. 

Distillate Fuel Oil - Michigan's 2009 distillate sales are projected to continue to decline by an additional 7.7 percent to just over 1.1 billion gallons.  Diesel fuel remains the prime component of distillate demand, with the majority being used by trucks on highways.  The current economic slowdown is the primary cause for the continued decline in demand as fewer good are shipped by trucks and rail. 

The American Recovery and Reinvestment Act of 2009 - This act contains several provisions that deal with the energy sector, including loans and investments in energy efficiency and renewable energy technology.  Michigan has seen increased funding for the low income Weatherization Assistance Program, the State Energy Program, the Energy Efficiency and Conservation Grants program, and Smart Grid investments.