How high can heating bills go Brace yourself

							How high can heating bills
   go? Brace yourself
               January 26, 2005

          BY SUSAN TOMPOR
        FREE PRESS COLUMNIST

http://www.freep.com/money/business/tompor26e_20050126.htm
"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.
               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.
                      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.
               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.
                Natural Gas Prices
• Mcf =Thousand
  cubic feet. 1
  Mcf=10.30 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/analysis_publications/natbro/gasprices.htm
        The Economics
• How do we
                     Price
                                        ?
  model demand?   $10.50


• What will       $9.77
  happen to
  quantity
  demanded?                Total Expenditures

• What are the
  factors?
                                                88.4
                                                    Quantity (Mcf)