Michigan residents unlikely to see natural gas prices soar as high as elsewhere, experts say
Michigan residents face many variables this blast furnace season, both the weather and the utility bills they have to heat their homes with – but the odds can be in their favor.
National energy officials said this week that winter heating bills are expected to skyrocket, by more than 50 percent for some homes. However, experts said Michigan’s natural gas storage capacity, market practices, and even untapped reserves position the state better than most and are even heading for a predicted roller coaster ride in La Nina winter.
Environmentalists across the country and Michigan said they hope the painfully high price of natural gas will motivate homeowners to replace gas stoves and other appliances with electric versions. This would reduce the overall use of fossil fuels by residential buildings, encourage faster renewable energy development, and better address greenhouse gas emissions and climate change, they argue.
“We really need a lot of the natural gas people interested in switching to electric, so it might actually be,” said Jan O’Connell of the Sierra Club’s Michigan Chapter.
However, natural gas prices in the state of Great Lakes may not rise quite as much as forecast elsewhere.
That’s largely because Michigan has more natural gas storage capacity than anywhere else in the nation, which state officials say allows utilities to physically hedge against national prices. It is the state’s unique geological features that allow companies to store underground natural gas that can be released during cold spells during spikes in demand.
“Michigan has the largest number of natural gas storage facilities in the United States. So we’re really well positioned to be protected from price spikes due to weather or delivery bottlenecks, ”said Nora Quilico, sales forecast manager for the Michigan Public Service Commission.
“Our two large energy providers – who serve around 90 percent of customers in Michigan – DTE and Consumers Energy, get over 50 percent of their winter needs from storage.”
That means the reserves can absorb the financial shock of increased demand when extremely cold weather tempts homeowners to turn up their thermostats. Utilities in Michigan are only opening the gates to meet demand, officials said.
Both consumers and DTE Energy officials said they will protect their customers from market-related price increases by relying on huge reserves in storage facilities, among other things.
“We buy natural gas in the summer when it’s cheap, store it in our 15 storage bays, and then use it for winter needs during the winter heating season,” said Katie Carey, director of consumer relations.
It is a unique and valuable asset that enables Michigan utilities to better prepare for the often bitter cold winter months, said Dan Brudzynski, vice president of gas sales and supply at DTE.
He said there are also long-term financial instruments that will help keep natural gas prices in check. He said buying decisions the company made months ago will benefit customers this winter.
“We are very conservative in planning. We want to be able to supply our customers with energy safely and reliably. So today we have set 90 percent of our expected supply needs. The prices were locked long before the price hike, ”he said. “So customers should see stable gas costs over the winter.”
And Michigan has another advantage in the natural gas sector, should immense storage capacities and guaranteed market prices not suffice in economically less volatile times to stabilize the consumer market.
Manufacturing companies could return to the oil and gas fields in northern Lower Michigan, where thousands of wells are poised to extract more of the fracking hydrocarbon gases. This activity across the Antrim Shale peaked in the early 1990s as no new well permits have been issued since 2015 due to low natural gas prices.
“There is little incentive for our members to drill for natural gas at the low prices,” said Jason Geer, president and chief executive officer of the Michigan Oil and Gas Association, an industry agency.
“But now I think that’s changing.”
Some of the natural gas that is already being used by Michigan consumers comes from the state, between 10 and 15 percent. Geer said that this proportion could increase with the higher world market prices.
Read more on MLive:
According to the government, US heating bills are expected to increase by up to 54% compared to last winter
La Niña has evolved; Cold water lurking below means at least moderate La Niña
Ann Arbor wants residents to get rid of gas stoves to fight climate change
Expect to pay more for gasoline, electricity, and natural gas this summer
Michigan has the largest number of underground natural gas storage facilities in the United States