How high can heating bills go Brace yourself

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How high can heating bills go? Brace yourself

• January 26, 2005
• BY SUSAN TOMPOR
• FREE PRESS COLUMNIST

http//www.freep.com/money/business/tompor26e_2005
0126.htm

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"Say, just how high was your gas bill?"

• People are taking a painful hit with their
  heating bills, thanks to a dramatic run-up in
  natural-gas prices. And they're grousing about it
  as much as they used to brag about those dot-com
  stock picks in the 1990s or those home refinance
  deals.
• The state's two largest utility companies say the
  average home gas bill was almost 20 percent
  higher last month than it was in December 2003.
  But that's nothing, really. Want to get really
  depressed? Just dig up your bills from a few
  years ago.

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Higher Bills

• December's heating bill could be 88 percent
  higher for some Michigan consumers than bills for
  December 2000.
  
• The reasons? Like everyone else around the
  country, we're paying higher natural-gas prices.
  A few years ago, Michigan consumers got lucky and
  saw unusually low heating bills, thanks to a
  three-year price freeze. But that
  bargain-basement deal ended in April 2001.

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Why?

• Consumers Energy, a subsidiary of Jackson-based
  CMS Energy Corp., and Michigan Consolidated Gas,
  which is owned by DTE Energy in Detroit, sell
  more natural gas in the state than any other
  utilities. Consumers has about 1.6 million
  natural-gas customers MichCon has about 1.2
  million.
• A Consumers Energy Web site -- www.consumersenergy
  .com -- noted that wholesale prices for natural
  gas have nearly doubled from the previous year.
  
• And lately, we're hearing that below-normal
  temperatures in the Northeast have forced
  utilities to draw more heavily than usual on
  stockpiles of natural gas for heating fuel.
• We're getting charged more, as the utilities pass
  along their costs for natural gas.

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For Landlords

• Kathy Pearson, a 41-year-old single mother, says
  she just about flipped out when she saw her bill
  for the two-family flat that she rents out down
  her street in Grosse Pointe Park. The bill, due
  Jan. 31, is 957.43.
• She will initially pay 363, as required under
  her budget plan. But she knows that she'll owe a
  ton of money when the adjustments are made for
  customers on the budget plan, which allows them
  to spread heating costs over the entire year.
  "The next month I can assume will be equal to
  that or more," she said.
• And her bill for the previous month would have
  been for 567, if she weren't on the budget plan.
  "This is crazy. How do people do it?" Pearson
  asked.
• She includes heat in the rent she charges because
  the property has 1 boiler and it would be hard
  for the renters of each flat to split heating
  costs otherwise. She's not sure anymore if she
  can afford to keep the property.

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Natural Gas Prices

• Mcf Thousand cubic feet. 1 Mcf10.30 therms
  (Based on the national average gas heat content
  for gas consumed by other than electric utilities
  in 2002).

http//www.eia.doe.gov/oil_gas/natural_gas/analysi
s_publications/natbro/gasprices.htm

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The Economics
?
Price

• How do we model demand?
• What will happen to quantity demanded?
• What are the factors?

10.50
9.77
Total Expenditures
88.4
Quantity (Mcf)