As Deadline Nears, Upper Peninsula Task Force Considers New Perspectives

Gov. Whitmer’s task force has just over three months left to issue its initial report on propane – the fuel source that 25% of Upper Peninsula customers rely on as their primary source of heating to get through some of the most brutal winter conditions in the lower 48. Nationwide, somewhere around just 6% of households use propane to stay warm at home (based on the National Propane Gas Association’s recent estimate that 7.8 million households use propane for in-home heating).

The result is that the wallets of UP residents get disproportionately strained compared to almost everywhere else in the country when propane prices spike in response to extreme cold. For example, as we talked about in our last blog post on the UP task force, in winter 2014 a polar vortex, combined with pipeline closures, led to 90% increases in residential propane prices at times.

The office of Attorney General Dana Nessel believes price spikes are such a problem that the state of Michigan needs new laws regarding “price gouging.” The AG’s office summarized draft legislation called the “Energy Pricing Protection Act” at the U.P. task force’s latest meeting, held Nov. 13 in Escanaba.

The act would prohibit a provider of an energy product such as gasoline or propane during or “reasonably after” a period of market disruption from charging a price for that product that is 10% or more higher than the price before the disruption occurred, unless the provider can show that the price went up due to increased costs. The proposed legislation also empowers the AG to investigate potential price gouging with the threat of both civil and criminal penalties.

This focus on consumer welfare separate from the energy market itself contrasts with many of the topics the task force has explored in the several meetings held since Gov. Whitmer formed the body this summer. Those meetings have primarily dealt with helping the members of the task force understand the physical makeup of the energy supply infrastructure serving the U.P. and how the market for propane and other fuels drives supplies in and out of the region. That focus on the supply situation has naturally generated discussions on what kinds of solutions are needed to make sure adequate amounts of propane are available for heating, especially in the situation where the Line 5 pipeline, one of the major delivery points for natural gas liquids that are processed into propane, might shut down.

The connecting thread through all of the task force’s investigations is the concern that the economic well-being of U.P. residents is at risk during times of energy market disruptions. It is a problem likelier to get worse as more extreme weather events occur. Propane supplies to the U.P. are also being strained by other factors, such as international market dynamics. New pipelines opened at the end of last year that connect the Midwest to export terminals on the Atlantic, and in March an export terminal in British Columbia opened. Inventories of propane in the Midwest have dropped as these paths to overseas markets pull supplies. The U.S. Energy Information Administration, the U.S. Department of Energy’s division that tracks energy data, presented this information to the U.P. task force at the Escanaba meeting.

Now that the task force has examined the U.P.’s energy picture from a variety of angles, at the next meeting on Dec. 10, the task force will take all the information and figure out how to next move forward, according to task force member and Marquette Mayor Pro-Tem Jenn Hill (also the secretary of the board of directors for the Citizens Utility Board of Michigan).

Follow more meeting recordings and presentations of the UP Task Force on the Michigan Department of Environment, Great Lakes and Energy website.