Michigan Heating fuel available, but expensive

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Heating fuel available, but expensive, low supplies cause oil, propane costs to double from last year

Monday, October 9, 2000

By Jill Haake JOURNAL BUSINESS WRITER

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Mittens. Hot cocoa. Down comforter. Fat wallet.

All could be key to coping with the cold this fall and winter.

Area customers who heat their homes using natural gas are guaranteed low energy rates for another season, but residents who rely on home heating oil or propane can expect to pay about twice as much as they did last year.

But all customers, no matter what their energy source, can expect to have enough fuel to keep thermostats steady, local energy suppliers said.

"We have plenty of product, but unfortunately, you have to pay a high price for it," said Pat Kloha, manager of Parker's Propane Gas Co. in Genesee Township. "A lot of (customers) are sticker shocked."

Lower-than-usual supplies of crude oil and home heating fuel have prompted industry experts to warn of a potential energy crisis and have sent crude oil prices skyrocketing.

The factors have more than doubled Parker's wholesale or "rack price" for propane, Kloha said. Parker's is trying not to pass the entire cost onto its customers, looking instead for ways to cut overhead expenses. But customers still are paying about 40 percent more than they did at this time last year, Kloha said.

The state Public Service Commission said residential propane sold last October for 88 cents a gallon, excluding sales tax. On Sept. 20, the statewide average was $1.18 per gallon.

Only about 6 percent of the state's households heat with propane, however, the PSC said.

Heating oil, used in about 12 percent of the state's homes, also is a victim of market swings.

Excluding sales tax, heating oil averaged about $1.32 a gallon Sept. 20, well above an average 96 cents a gallon last October and a peak price of $1.21 in mid-March.

Customers of Atlas Oil, which owns Flint's Streat Fuel Co., pay $1.33 to $1.36 a gallon, about 30 cents more than this time last year, said Michael Evans, president of the Taylor-based company.

Usually, propane and heating oil charges are low in the fall and rise as demand grows through the winter. But this year's price spikes come at a time when temperatures are mild, leaving some concerned about what prices will be during the heart of winter, when consumers use more energy.

"The rack price for us is extremely high right now, and (we) don't see any downturn," Kloha said.

William Amthor, a Fisher Body retiree, uses heating oil in his Groveland Township house and propane in a garage where he refurbishes antiques as a hobby.

While he doesn't like the higher charges, Amthor said he can afford them. And knowing that heat is a necessity helps him take the market swings in stride.

"That's all you can do. You just have to pay more," Amthor said.

Most residents in Genesee and surrounding counties heat their homes using natural gas and are customers of Jackson-based Consumers Energy, one of three utilities with rates frozen under the state's Gas Choice deregulation program.

Consumers' natural-gas charge is locked at $2.84 per thousand cubic feet until April 1. But in other parts of the country, natural gas sells for more than $4 per thousand cubic feet.

Amthor, 72, said he would switch to natural gas if it weren't so expensive to extend and tie a natural gas pipeline to his Perryville Road property and install a high-efficiency natural-gas furnace. He estimated the cost would be about $6,000..

Terry Hanson, executive director of the Genesee Landlords Association, said most of the area's rental properties use natural gas, and tenants pay for the utility based on individual consumption.

Hanson calls the widespread use of natural gas a "salvation" to the local rental community. In other parts of the country, real estate professionals have warned of rent increases to offset higher landlord-paid utility expenses.

Jeff Holyfield, a Consumers spokesman, said it is tough to predict what the utility's rates will be after the lock ends because natural gas is one of the most volatile commodities on the New York Mercantile Exchange.

But even with the current frozen rate, customers might feel a financial squeeze if severe weather forces them to consume more natural gas. The PSC said the state's natural gas sales were lower the past two winters because of warm weather.

A National Weather Service forecast says the state should have near-normal temperatures during the first months of winter and slightly warmer than normal temperatures after the first of the year, the PSC said in its Winter 2000/2001 Energy Appraisal.

No matter what the weather, modern furnace systems should help keep costs down for customers using more energy, several area heating company officials said.

Chris Turton, operations manager for Action Heating & Air Conditioning in Flint Township, said replacing older furnaces - even one 5 years old - with newer, high-efficiency systems can cut heating costs in half.

The high-tech equipment typically sells from $1,500 to $3,600 depending on its features, said Lou Blessing of Blessing Co. in Grand Blanc.

However, Turton and Blessing said residents aren't rushing to convert to natural gas furnaces.

They said most people either converted soon after natural gas became available in their area or are taking a wait-and-see approach to see how weather or economic factors play out.

Since 1996, Consumers has installed more than 160 miles of gas lines to extend its supply of natural gas throughout Genesee and Lapeer counties, said Tom Begin, Consumers' director of strategic growth.

The utility next year will extend and boost natural gas capabilities in Grand Blanc Township's high-development areas. Consumers' upcoming work, said Holyfield, is testament to the company's ability to supply new and existing customers. While smaller outfits could run into supply troubles, Consumers has "taken every reasonable step to make sure we've got adequate supply," Holyfield said. The utility has about 165,000 natural gas customers in Genesee County.

Brian Hopps, vice president of supply and terminal operations for Atlas Oil, said supply shortages are a risk in the home-fuel industry, but he is confident of his company's ability to serve its 1,500 local customers.

Heating oil inventories are lower than normal for this time of year because refiners, turned off by low wholesale prices, produced less of the fuel last year. Additionally, an early-year cold snap in the Northeast - the nation's biggest region for heating-oil consumption, wore down supplies.

Hopps said another nasty winter in the Northeast could force traders to funnel heating oil supplies out of the upper Midwest to "put out fires" on the East Coast.

"The potential for some type of shortage to happen with heating oil supplies is definitely there this winter," said Hopps. "It's not likely that it'll happen, but it could happen. Bottom line: The threat is real."

For now, though, Hopps said Atlas' Detroit terminals are stocked adequately, and many customers already have received their first seasonal fill.

Most customers, he said, fill their tanks from mid-September to mid-October. But this year - perhaps because of weather or price concerns - many got their first fill about two weeks ahead of schedule, he said.

As for propane, the PSC estimated the state's supply in June was 59 million gallons, 42 percent less than June 1999.

But Kloha said Parker's doesn't have a supply problem now and won't because it has contracts with large suppliers and "tremendous" on-site storage capabilities. The company serves about 7,000 mid-Michigan customers.

http://fl.mlive.com/news/index.ssf?/news/stories/20001009f8a1energy.frm

Jill Haake covers business and development issues. She can be reached at (810) 766-6336 or jhaake@flintjournal.com.

-- Martin Thompson (mthom1927@aol.com), October 09, 2000


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