Lansing, MI, October 12, 2001 – The Michigan Public Service Commission today released
the report "Michigan Energy Appraisal:  Winter 2001-2002."  The appraisal reviews the
projected prices and availability of energy in Michigan over the winter months. 

Winter energy supply is expected to meet the needs of Michigan households and businesses
at prices that are likely to remain low.  This is due, in part, to lower energy demand 
as a result of the economic slowdown following the tragic events of September 11, 2001.
This outlook is prepared at a time of considerable uncertainty as to how world events 
might affect both energy supply and prices in ways not anticipated in the following 
appraisal.

Natural Gas – Michigan natural gas sales for the year 2001 are expected to decrease 
slightly to 873 billion cubic feet (Bcf), down 0.80 percent from sales in 2000.  In 
October, an estimated 544 Bcf of natural gas was inventoried in Michigan storage fields.  
This is equivalent to almost two-thirds of the state's annual usage, although some of 
this supply flows out of state during the peak winter months.  The high inventories in 
Michigan and the nation and the reduced demand due to a weakening economy has pushed 
prices on the spot market to near record lows not seen since the early nineties.  In 
early October 2001, natural gas prices on the futures market for the last two months 
of 2001 have dropped to an average of $2.42 per thousand cubic feet (Mcf).  Michigan 
Consolidated has proposed to increase its gas cost recovery rate when it goes into effect 
in January 2002, when its current frozen rates expire.  Consumers Energy's gas cost 
increased in April 2001, but as of October they are charging 20 percent less than the 
maximum allowable rate. 

Electricity – Michigan electricity sales are expected to grow 0.7 percent in 2001, 
compared to the 1.2 percent growth seen in 2000.  Warmer-than-normal weather this summer 
contributed to record peak demands and higher electricity sales, especially in July and 
August.  New generating units and increased transmission capacity continue to improve 
the outlook for electricity supply in Michigan.  No supply shortages or transmission 
constraints are expected to impact the ability of Michigan utilities to meet winter 
peak electric demand, which is normally about 30 percent lower than the summer peak 
demand. 

Petroleum – Crude oil and gasoline prices rose in September immediately following the 
terrorist attacks, but have since declined.  This is largely due to OPEC's indication 
that it would maintain plentiful supplies both during the crisis and out of concern 
for a weakening world economic growth.  As a result, the average prices of OPEC oil 
dropped from $25.31 per barrel on September 21, 2001 to $21.47 on September 28, 2001.  
The economic slowdown began before the September 11 attacks, and it is now expected 
to be more pronounced.  This will keep crude oil prices depressed until mid-2002 when 
the economy should show a distinct recovery. 

Motor Gasoline – Michigan's gasoline demand usually declines over the winter months, 
which when coupled with the recent decline in crude oil prices and lower economic 
activity, has pushed retail prices down.   The September 15, 2001, changeover to winter 
grade gasoline has helped the supply picture, however, the outage of the Citgo refinery 
in Lemont, Illinois continues to increase the amounts of gasoline supply imported into 
the Midwest.  

Distillate fuel oil – Distillate inventories are very low and are expected to remain low 
through the winter due to the Citgo refinery outage and Midwest refiners' efforts to 
maximize gasoline production over the summer.  Low regional inventory levels combined 
with refinery outages mean supplies will be tight through the winter heating season.  
This could keep home heating oil prices above the national average although at levels 
still below those seen last winter.  Michigan residential heating oil prices averaged 
$1.29 on October 8, 2001, down $.08 from a year ago.

Energy Emergency Preparedness – Michigan energy supply is generally secure and 
reliable.  Energy suppliers have generally taken additional measures to assure the 
security of the state's energy infrastructure.  Built-in redundancy in the energy 
distribution network also helps assure the reliability of supply.

The Michigan Energy Appraisal is prepared every six months.  Copies of the report 
can be obtained by contacting the Michigan Public Service Commission, Executive Secretary 
Division, P.O. Box 30221, Lansing, MI 48909, or by calling (517) 241-6175, or fax (517) 
241-6101.  The Energy Appraisal is also available on the World Wide Web at: 
http://cis.state.mi.us/mpsc/reports/energy/current/.  

The MPSC is an agency within the Department of Consumer & Industry Services.