Mich:Rising prices could have big impact for propane, heating oil users

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Rising prices could have big impact for propane, heating oil users While natural gas prices are frozen until April, the cost of other heating sources isn't.

Sunday, December 17, 2000

By Beth Anne Piehl Staff Writer

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Niles Johantgen expects the cost to heat his rural Horton home with propane will rise this winter.

"The price right now has come down from last year," said Johantgen, 67, who switched to a less expensive propane dealer after soaring prices last year. "But I suppose by January or February, there'll probably be an increase. They said they hope not, but I guess that's supply and demand."

Others may be too late to shop around.

Already, per-gallon prices for propane are up 14 cents since October to $1.35 per gallon, according to the Michigan Public Service Commission. That could rise another 10 cents or more per gallon by the time winter wears itself out.

Last December, propane was selling for 94 cents a gallon.

But it's not just those heating their homes with propane who can expect increases in their heating bills this winter. Heating oil also has risen from $1.38 per gallon in October to $1.56 this week.

And the national Energy Information Administration estimates that, on average, residential bills for natural gas users will increase at least 50 percent from last year to about $834 during the heating season.

"All heating fuels, all sources of energy, are on the rise," said Mark Pennington, president of Pennington Gas Service based in Morenci and serving 22 south-central Michigan counties with propane, including Jackson.

"Natural gas at the beginning of the season was projected by the national Department of Energy to be 44 percent higher this year. It's actually going to be more than that, based on the conditions that I'm seeing."

Michigan natural gas customers, however, won't experience those increases this year. For the past three years, the Michigan Public Service Commission and state utilities, including Consumers Energy and MichCon, have frozen prices.

Consumers' rate has been $2.84 per thousand cubic feet how natural gas use is measured since 1998. However, the three-year program expires in April and prices are likely to jump then. (See related story, Page A-1.)

It's propane users who will be hardest hit this winter.

Pennington, also treasurer of the Michigan Propane Gas Association, said propane wholesalers are paying double what they did in the summer of 1999. Customers then were paying a low 90 cents to $1 per gallon.Most of those increases are being passed along to customers.

"It's hard on everyone," said Pennington. "Unfortunately, look outside winter hasn't officially arrived yet, but I think we can say it's here."

Energy experts say the increases stem from rising crude oil and natural gas costs nationwide, soaring demand and low inventories. Two years ago, a barrel of crude oil sold for $10; now it's $30. Natural gas was being sold for less than $3 per thousand cubic feet; now it's selling for more than $9.

"We're talking about a tripling of the price here," said Scott Brockelmeyer, a spokesman with Ferrellgas, which has a Jackson location and is based in Kansas City, Mo. "It's gone through the roof."

Another factor that will result in higher bills for most propane and heating oil consumers in the Jackson area: a typical winter is on tap. Many Michiganians, it seems, have forgotten that normal winters here are colder and snowier than the milder versions the past few years.

Propane and heating oil both by-products of crude oil and natural gas are typically similar in cost to users, although individual bills obviously vary by size of home and the occupants' desired temperature settings. Natural gas is usually a less expensive option.

Because filling a propane or heating oil tank is different than measuring cubic-foot usage for natural gas, it's difficult to get an exact estimation of the difference in costs to the users.

Rough estimates calculated are:

During a typical winter, natural gas residential consumers can expect to spend about $108 a month. That's based on an average use of 25,000 cubic feet of gas, according to Dan Bishop, a Consumers Energy spokesman in Jackson.

For propane customers, the typical home uses about 1,000 gallons a year, most of that in the winter. At a cost of $1.35 a gallon the current average cost a homeowner is spending about $1,350 a year. However, the Michigan Propane Gas Association estimates customers will average about $150 a month this year, or $1,800 a year.

Heating oil costs about $1.56 a gallon, and usage is about similar to propane, so it would cost a user close to $1,560 a year. Data from the energy administration and the Michigan Public Service Commission shows that in Michigan, about 3 million households, or 85 percent, rely on natural gas for heating needs. Jackson County relies mostly on natural gas as the main heating source, according to Bishop.

Another 207,000 households use propane, or about 6 percent. According to Pennington, the state leads the nation in number of propane-using households.The remaining 9 percent of homes, or 293,000, use other sources such as electric, fuel oil or wood.

Brockelmeyer of Ferrellgas said propane companies knew cost increases for their industry were imminent several months ago. At that time, many, including Ferrellgas, encouraged customers to fill up then at the cheaper rate before the hike.

"We knew it was coming," Brockelmeyer said. "We bought it when it was cheaper, too, so we could fill up our customers heading into the heating seasons."

Price increases for all heating types are expected to hit hardest on the elderly, who are on fixed incomes, and the poor, some of whom may have to choose between heating their homes and eating, energy officials said.

Johantgen, the retired Horton resident, said he watches his expenses but isn't on a fixed budget. He and his wife, Wilma, will spend at least $600 this winter on heating costs to fill up their 500-gallon propane tank at their current rate of $1.20 a gallon.

He echoed the concerns for those who aren't as well-off who are facing a cold winter.

"We're lucky it's not a real hardship on us," Johantgen said. "But I know there's a lot of older people out in the country who use propane. It's going to be hard on them."

Reach reporter Beth Anne Piehl at bpiehl@citpat.com or 768-4945.

http://ja.mlive.com/news/index.ssf?/news/stories/20001216jhomehe193.frm



-- Martin Thompson (mthom1927@aol.com), December 19, 2000


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