Heating costs is all on the customers

Analysis:

The story is basically saying that many things will cost more due to the increase in heating gas costs. The story is broken into 3 main parts. First, there is one home owner and then a series of business owners who talk about the impact that rising heating costs will have. Some businesses have responded by passing the costs onto customers and some are looking at was to be more energy efficient. Next, readers get DTE Energy’s perspective on the rising costs. The company’s spokesperson says that they have “no control of over the wholesale prices of gas, but we can recommend consumers do everything they can to reduce gas consumption.” At the end of the story there is mention of the impact this will have on low-income populations and that both Kent and Ottawa County will try to have support available for people unable to pay their bills.

The reporter then quotes DTE as saying the increase is due to “soaring world crude-oil prices, depleted supplies, high demand and falling U.S. production made worse by last fall’s hurricanes.” No where in the article are these reasons verified. The article also quotes the DTE representative as saying “The utility companies aren’t reaping big profits. Under state law, Michigan’s natural gas utilities are allowed only to recover the cost of natural gas they purchase, but without any mark-up.” Readers should ask themselves if this means that DTE doesn’t or can’t make a profit off of the natural gas it sells in Michigan? If they do make a profit then that statement couldn’t be true. Also worth looking at is what kind of lobbying does the company engage in with Federal and State legislators. A couple of examples we found were that 1) According to the Center for Responsive Politics ranking member to the House Energy and Commerce Committee, Rep. John Dingell has been a major recipient of campaign money from DTE and that 2) according to the Institute for Money in State Politics DTE contributed over $285,000 to state candidates in Michigan in 2004. In other words, there seems to be more to heating costs than hurricanes and production cost changes.

Story:

Bundle up and brace yourself: Economy expected to take hit from heating prices
By Mary Radigan

Shari Goodwin was so stunned, she called DTE Energy to make sure there was no mistake.
The new homeowner found out, yes, her $125 heating bill was for real, even if it was triple her October bill.
Like the rest of us, she was shocked.

“I called DTE Energy to say this was impossible,” said Goodwin, who keeps the thermostat at 69 in her single-wide mobile home in Gaines Township. “Now I’m almost sorry I jumped into home ownership, because I’m paying so much for heating,” Goodwin, 59, lamented.

It’s not just homeowners who are turning pale. Hefty bills are landing with a thud at the doorsteps of merchants, manufacturers, hospitals, office buildings and restaurants.

Dan Gendler, owner of San Chez restaurant and the Mezze Cafe, 38 W. Fulton St., has already raised menu prices to cover rising costs. Gendler, who pays between $1,200 and $1,500 a month to heat his restaurants, expects his annual costs to soar another $15,000 to $20,000 in 2006. He is fighting back by installing programmable thermostats and automatic turn-off water valves on restroom sinks. Ovens are left off until needed.
“I already increased prices by 3 percent to bear the brunt of increased raw materials and energy costs in 2005,” Gendler said. “We may be forced to pass on more.”

Centerpointe Mall’s owners are thankful they installed a more efficient heating system last year. “But in our last bill we went from paying 92 cents to $1.44 per hundred cubic feet of natural gas,” said Deb Smith, marketing director. “That’s more than a 50 percent increase, so our first quarter (in 2006) could be a shocker.” The owners of the shopping center at East Beltline Avenue and 28th Street SE already paid $36,000 from January through Nov. 18 to heat about 900,000 square feet. That is the mall’s common space, but not space leased by stores.

Small merchants worry, too.

Meagan Andres, owner of Lynch’s Lair at 2055 28th St. SE, in the Grand Central Plaza, said her November gas bill jumped $100 and she fears she will face bills exceeding $200 a month for the small Irish and Celtic gift store she opened a year ago. “I’m only heating 900 square feet because I keep the storage room closed and it’s freezing in there,” Andres said. “The sun through the front windows of the store helps — when there’s any sun — and I put on sweaters and dial down to 60 degrees at night.”

The impact of the higher costs is expected to be felt throughout the already-struggling Michigan economy.
Manufacturers, some of the largest users of energy, also are concerned that double-digit increases could have a dramatic impact on production.

General Motors Corp. says it is trying to put the brakes on those costs. “Energy costs actually started going up in 2003 and 2004,” said Tom Neelands, director of GM’s energy and utility services group. That’s why GM has focused on efficiency and conservation. Processes are as simple as turning off machines and switching to more energy-efficient light bulbs and as complex as converting from natural gas to landfill or methane gas to operate plants.

DTE Energy says its natural-gas customers should expect an average 57 percent hike over last year’s bills. That is thanks to soaring world crude-oil prices, depleted supplies, high demand and falling U.S. production made worse by last fall’s hurricanes.

The average home paid $150 a month between November and March last year, but this winter, the average bill is expected to shoot up to $235, said Len Singer, a spokesman for DTE Energy, this area’s largest natural-gas provider.
The utility companies aren’t reaping big profits, he said. Under state law, Michigan’s natural gas utilities are allowed only to recover the cost of natural gas they purchase, but without any mark-up.

“We have no control over the wholesale price of gas, but we can recommend consumers do everything they can to reduce gas consumption,” Singer said. “Every degree you dial down on the thermostat will save you 3 percent on the bill.”

Goodwin, who bought her mobile home in Gaines Township’s Brookside Estates last summer, is worried about keeping up with costs. She cut back on her cable TV package and reduced her phone service. Goodwin also just turned to DTE’s budget payment plan, which still will cost her about $100 a month, year-round. The amount is adjusted annually and any shortfall is paid before the next year.
Some people can’t cover their bills.

Kent County service agencies have seen requests for utility assistance increase by 50 percent over last year. But funding can’t meet the need, with $250,000 less to work with this winter, according to agency officials.

In Ottawa County, where Semco Energy Co. is the primary provider, calls to the Community Action Agency for heating assistance are up 45 percent since October, but fewer residents are being helped because of a $78,000 loss in funding, said Susan Cervantes, program supervisor.

“Even though people knew this was coming, they didn’t go into sticker shock until the first bill arrived and the money wasn’t there,” Cervantes said. Cervantes said families should call if they receive shut-off notices, since the agency hopes to receive a funding grant in the next few weeks.

As a result of the budget shortfalls, Community Action Agencies in Kent, Ottawa and Muskegon are holding a West Michigan Walk For Warmth fundraiser in each county on Feb. 25. For information, call (616) 336-4113.

DTE’s Singer said customers should contact the utility to work out a payment plan if they expect problems.
“We can customize a payment plan for anyone,” he said.