Residents Respond To Higher Heating Costs This Winter
U.P. Agencies Can Help Needy Families With Utilities, Food
By Paul Gingras

"I want people to be as efficient as possible, to build tight homes, put in good insulation, whatever they can do to weather the storm," said propane and fuel oil supplier Steve Autore of Cedarville, noting that prices for fuels derived from crude oil have skyrocketed this winter, as have local prices for electricity. Compared to last winter, natural gas prices for SEMCO Energy Gas Company, a major local supplier, have decreased, although, in general, natural gas prices in Michigan have nearly doubled since 2002.

The result has been a scramble to make the heating systems in homes and businesses more efficient to reduce fuel consumption and increased citizen demand for financial assistance.

An exceptionally cold winter has helped drive up oil-based heating costs, Mr. Autore said, and reduced water flow from Lake Superior to the St. Marys River have reduced hydroelectric power output by Edison Sault Electric Company in Sault Ste. Marie, forcing it to purchase electricity elsewhere and increasing electricity prices for its 23,000 customers in the Eastern Upper Peninsula.

Edison's prices rose from about 8.34¢ per kilowatt hour last winter to 9¢ per kilowatt hour this year, raising the average monthly residential electricity bill to $68.16, said Lee Baatz, assistant vice president of rates for Edison Sault.

Owing to reduced hydroelectric power production, the state allowed the company to raise prices this January, he said. Last winter, Edison Sault produced about 40% of its power from its hydroelectric facility. Now, only about 27% of the power it sells to customers is produced by water power, forcing the company to buy more electricity on the open market from companies utilizing fossil fuels and nuclear power.

"Their costs are going up, too," Mr. Baatz said.

Another factor in higher electricity prices relates to recently expired wholesale power purchasing contracts with Wisconsin and Lower Michigan companies. The new contracts are more costly, Mr. Baatz said.

Responding to higher electricity prices, the Moran Township Board of Trustees decided to replace the township hall's electrical heating system with a propane furnace.

February's electricity bill at the hall was $500, about 25% higher than last year, said Township Supervisor Jim Durm.

"We think [propane] will be somewhat cheaper," Mr. Durm said, noting that the new furnaces are 90% efficient in keeping the heat from escaping out the chimney. Timers will also lower the heat when the building is not in use.

Mr. Autore advocates conservation and efficiency as the best way to reduce heating costs, rather than switching fuel sources.

Many people own a furnace for more than 20 years, he said, and can use it five to 10 years without giving it a tune-up, or never give it one, and as furnaces age, their efficiency drops.

"Imagine waiting five to 10 years to tune up your car. What would that do to your mileage?" Mr. Autore asked, noting that furnace maintenance saves customers money while conserving limited fuel sources.

This winter, the cost to heat the average household with propane is $800 to $900 a month. The average monthly bill to heat a home with fuel oil is abut $750 a month, Mr. Autore said.

Propane and fuel oil are derived from crude oil, so like gasoline, their prices have risen sharply since this time last year, Mr. Autore said. Last March, his company sold propane for $1.74 a gallon. This March, Autore Oil is selling it for $2.40 a gallon, and the price is rising daily, he added. Last February, the company sold fuel oil for $2.19 a gallon. As of March 12, 2008, it was selling for $3.69 a gallon.

The falling value of the American dollar is a big part of price spikes for both fuels, he said.

"I think [propane] is extremely expensive," said Moran Township resident Nancy Dandona, owner of Totem Village on US-2, who relies on propane heat for her home and business.

Ms. Dandona has lived in her house for two years. It is her first home without a woodstove, and she misses the savings.

She is considering replacing her propane system with a geothermal system, which removes heat from groundwater and uses it for home heating.

To compensate for high gas prices, she keeps her thermostat below 70 degrees Fahrenheit and takes advantage of Autore Oil's prebuy program, when it is offered.

Pre-buying propane works well for seasonal businesses, Ms. Dandona said.

Autore and other companies monitor the propane market, wait for prices to drop, buy in quantity, and pass the savings on to customers who can afford to pay for a large amount of gas up front. Once pre-bought gas runs out, however, customers pay the current market price, which fluctuates and may be much higher than the pre-buy rate.

For the past two years, the fueloil market has been too volatile for Autore Oil to offer a pre-buying program for that type of fuel, Mr. Autore said.

Abudget plan allowing residents to average their payments for fuel oil or propane over nine or 10 months is being used much more than in the past, Mr. Autore said. Although this budget plan does not lock in the cheapest prices like prebuying does, averaging bills over several months helps, especially since a lot of people in the Eastern Upper Peninsula work more during the summer and fall, and seek to avoid high costs during the less profitable winter months.

High heating prices "are very, very hard on people," Mr. Autore said, "and they are hard on us as a supplier, since we are using the same fuel ourselves."

To compensate for higher gas prices, the company has made its delivery routes more efficient and encouraged customers to notify the company when their fuel containers drop to 20% capacity.

With diesel fuel at $4.19 a gallon, the company can no longer make special trips, free of charge, when customers run out of fuel. Now, they are charged for special trips.

Like the bidding war U.S. companies are engaged in for crude oil overseas, an intense bidding war for natural gas is going on inside the country.

Demand for natural gas is not keeping pace with production, explained Tim Lubbers, director of corporate communications for SEMCO Gas Company, which has approximately 1,700 customers in the Eastern Upper Peninsula, mostly in the St. Ignace area.

Rates for gas vary monthly.

This March, SEMCO charged residents about 94¢ per cubic foot of gas. Adding customer charges, residents using 100 cubic feet of gas a month paid $104.02, according to records provided by the Michigan Public Services Commission, the state regulatory body for public utilities.

In March 2007, residents paid 99¢ per cubic foot of gas. Adding customer charges, residents using 100 cubic feet of gas paid about $109.

This year, some natural gas companies are increasing prices, others are holding even with last year, and some are decreasing prices. Prices for individual companies vary depending on how much gas they bought when costs were low and how much they could store, Mr. Lubbers said.

Storage is the key in Michigan, he added.

The state has more natural gas storage capacity than many other states, leading to lower natural gas prices by comparison, because companies here can buy more gas and store it when prices drop.

Ninety percent of the natural gas consumed in the U.S. is produced in the U.S. Wells are slowing output at the same time that demand is increasing, Mr. Lubbers said.

Increased demand has driven up prices in recent years. Most new demand comes from new naturalgas fired power plants. Discovery of new natural gas wells has not kept pace with their needs, he said.

For residents facing high monthly bills, Mr. Lubbers' advice mirrors Mr. Autore's suggestions: Make use of plans that average bills out over several months, and conserve as much as possible. Customers cannot control demanddriven pricing, he said, but they can control the efficiency of their homes.

Despite the best efforts of many residents to conserve, "Rising energy costs and heating bills have much more impact on the most vulnerable families," said Bill Long, interim executive director of the Food Bank Council of Michigan (FBCM). Mr. Long is the former chairman of the Michigan Public Service Commission.

The result has been that many families in need have had to choose between buying food and paying for heat this winter. To fill the gap, some have been turning to local food banks for help, according to the Food Bank Council of Michigan.

While utility companies offer some shut-off protection during the coldest months, and local organizations provide assistance with heating costs, it is not enough to cover the gap, according to Mr. Long. If families are forced into the position of choosing between heat and food, they should talk to their energy supplier to maintain heat, and contact a local food bank for assistance.

People in the Eastern Upper Peninsula who have emergency food or utility needs can seek help by calling the Project Hope hotline at 643-6780.

To learn more about donating to a food bank in your community, visit www.fbcmich.org.

The Upper Peninsula 211 Service can help needy residents find assistance in paying energy bills. The free service provides referrals and information regarding eligibility for assistance programs. Dial 2-1-1 or (800) 338-1119.