More than three-quarters of Michiganders stay warm in their homes through winter with natural gas, and that is going to hit their household budgets hard in coming months.
Energy industry experts point to significantly growing demand for natural gas and unstable market conditions because of geopolitical conflicts as the dual problem. The outfall is a spike in cost for residential natural gas projected at 29% through this winter, largely because of jumps in commodity prices.
State officials are encouraging Michigan residents to sign up for energy assistance programs because of these rapidly increasing energy costs.
Experts with a consumers protection group are also closely watching conditions across Michigan and its executive director said they worry high price for natural gas won’t only be a problem solely this winter but will extend throughout 2023. That’s because utilities will recover the cost of this year’s fuel by raising rates next year.
“If (utility companies) underestimate, and gas turns out to be more expensive than they thought, then the next year the charge goes up to make up the difference,” said Amy Bandyk, who leads Citizens Utility Board of Michigan (CUB).
“Because the run-up in gas prices was unexpected this year, we are seeing the utilities under-recovering large amounts because their forecasts were off.”
Bandyk said the group’s calculations show electric rates for residential customers in 2023 may rise by 7% for DTE and 14% for Consumers Energy.
Unfortunately, Michigan utility regulators say they can’t do much to limit the pain.
Regulators have oversight on energy rates for utilities’ expenses and infrastructure investments, plus power supply cost recovery; international commodity prices are not under their purview and the Russian war in Ukraine is wreaking havoc on the market.
“It’s not a Michigan specific thing. It’s not even a U.S. specific thing. It’s just the underlying price of gas as a commodity,” said Dan Scripps, chairperson for the Michigan Public Service Commission.
War on the other side of the globe isn’t the only factor. More natural gas is being used here, too.
Collectively, state utility regulators project natural gas consumption for all sectors is forecasted to rise by 13.8%, attributed to increase in demand for both residential use and electric power generation. And that presumes normal weather through this winter season.
Scripps said a cold winter could exacerbate conditions by even further boosting demand, which is already forecasted to increase by 13% because of a rise in the number of days residents are expected to run their furnaces.
Energy industry research scholar Robert Johnston, of the Columbia Center for Global Energy Policy in New York, said scenarios laid out by state utility regulators in Michigan seem reasonable given current circumstances.
He said it “will be hard for regulators to keep pace with all the moving parts and associated price volatility.”
And there are more complications on the horizon.
Statistics in the state’s latest winter energy appraisal show this year’s largest spike in natural gas use comes from the electric power generation sector at nearly 20%, what regulators called a “significant rebound” from the nearly 10% decline seen in 2021.
That single-year turnaround comes as no surprise to Zach Anderson, top operating officer for Cadillac-based Wolverine Power Cooperative. That’s because natural gas peaking power plants are running more like cyclical plants, carrying more of the everyday baseload as nuclear and coal-burning units go offline elsewhere in the state.
For example, Wolverine’s Sumpter Plant in Belleville was built to be a peaking plant, yet the number of days it now runs has increased nearly 400% since 2015. The co-op’s Alpine Plant built in 2016 in Elmira has run for hundreds of days in a row.
Anderson said the concern is the energy transition from fossil fuels to renewable resources is hampered by a few factors: a backup of new renewable generation proposals awaiting review and authorization from the regional grid operator; need for more long-range transmission lines to buy power from other states; and new technologies that can carry electricity baseloads when renewable sources such as wind and solar aren’t generating.
“From a timing aspect, it’s going to take us the better part of a decade or two to really transition through all this. There’s a lot of planning and coordination that needs to occur,” Anderson said.
“For us to integrate more and more renewables, you need something that’s there backing it up to manage it. Natural gas peakers can do that and do that really well today, but we need more of those or some other technology that can be fast ramping and responsive to manage daily changes in weather or just the natural rhythm of life.”
Anderson said Wolverine doesn’t have plans to build more fossil fuel generation but legally opposed the early retirement of the coal-fired J.H. Campbell power plant in Ottawa County, now scheduled for 2025. He said the cooperative doesn’t oppose shutting it down earlier than initially planned in 2040, “just not this early.”
Consumers Energy intends to retire the coal plant this decade to ramp up its decarbonization goals as part of its climate action plan. State regulators approved the plan in June this year.
Officials at regional grid operator Midcontinent Independent System Operator confirmed this year brought a record number of new generation applications and 96% were for renewable energy sources or storage facilities.
“At this point, we are experiencing exponential growth in the queue,” said Andy Witmeier, MISO’s director for resource utilization. “The current applications continue to be heavily weighted with renewables and standalone storage requests again tripling the amount submitted the previous year.”
In July, the regional grid operator authorized $10.3 billion in long-range transmission projects, including some that will run into Michigan.
Related articles:
How Michiganders can get help as heating costs spike this winter
Palisades nuclear power plant shuts down 11 days early
$260M upgrade will help Consumers Energy store natural gas for cold, winter days
Michigan’s utilities struggle to keep the power on as climate change intensifies
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