Michigan gas demand projected to slow, electricity use to rise

By the OGJ Online Staff

HOUSTON, Oct. 31, 2001 – Michigan natural gas demand is expected to decline slightly this year, compared to last, while electric power demand is projected to grow but not as fast as in 2000, state regulators said in a new winter assessment.

The Michigan Public Service Commission also rated energy supply as “generally secure and reliable.” It said suppliers have taken additional measures to insure the security of the state’s energy infrastructure and built in redundancy in the energy distribution network also helps assure supply reliability.

Michigan natural gas sales for 2001 are expected to decrease to 873 bcf, down 0.8% from sales in 2000. In October, an estimated 544 bcf of natural gas was inventoried in Michigan storage fields.

Regulators said this was equivalent to almost two-thirds of the state’s annual usage, although some supply flows out of state during the peak winter months. Falling gas prices have helped boost industrial use.

But regulators cautioned the longer-term impact of the slowing economy remains uncertain and noted the outlook was prepared at a time of “considerable” uncertainty about the effect of world events on energy supply and prices. If the winter turns out to be colder than normal, the slowing economy may still have a dampening effect on increased gas usage, the commission said.

Michigan natural gas production is projected to decline 7% to 226.8 bcf in 2001. This is in addition to the 7% decline between 1999 and 2000. Slow growth in production of Antrim gas and reductions in Niagaran Reef production continue to contribute to lower production.

Net interstate deliveries are projected to increase to 695.9 bcf in 2001 from 560.2 bcf in 2000. Regulators attributed the increase to more dependence on interstate pipeline deliveries to replace declining Michigan production.

No supply shortages or transmission constraints are expected to hurt the ability of Michigan utilities to meet winter peak electric demand, which is normally about 30% lower than the summer peak demand, regulators said.

For 2001, Michigan electricity sales are expected to total 104.7 billion kw-hr, up 0.7% over 2000 sales levels. Regulators said the projections are based on trends that have not fully reflected the severity of the economic downturn since the terrorists attacks Sept. 11 and actual sales for 2001 and 2002 may be below the level projected.

Michigan electricity sales to ultimate customers decreased 1.6% in the first six months of 2001, versus the same period in 2000, according to the assessment. Most of the slower growth was the result of a slowing economy, regulators said.

Warmer-than-normal weather this summer contributed to record peak demands and higher electricity sales, especially in July and August. The assessment noted supply is in much better shape than in 2000 or 1999. New generating units and increased transmission capacity continue to improve the outlook for electricity supply in Michigan, according to the assessment.

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