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Published: Thursday, 1/3/2008

Gas-rate gap widens for Ohio, Michigan

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER

A major natural gas utility in Michigan has lowered its rates for January, citing falling wholesale prices and sufficient storage.

With the decrease, consumers in southeast Michigan will pay 33 to 40 percent less this month than their deregulated neighbors in Ohio for the same amount of natural gas.

Michigan Consolidated Gas Co., which serves areas of northern Monroe County and is a subsidiary of DTE Energy, announced last week that it is lowering the price it charges for natural gas by a nickel, to 70 cents per 100 cubic feet in January.

The price matches what customers of Michigan Gas Utilities Corp., which services areas of southern Monroe and Lenawee counties, have paid since November. Customers of Consumers Energy Co., which also serves portions of Lenawee County, will be charged 77 cents per 100 cubic feet this month, according to the Michigan Public Service Commission.

Across Michigan, the average cost per 100 cubic feet for natural gas was 75 cents, the commission said. By comparison, the average January price from providers of 12-month contracts in Columbia Gas of Ohio's service area was $1.08, and Columbia Gas will charge $1.04, according to the Public Utilities Commission of Ohio.

Ohio Gas, which provides natural gas services to areas of western Lucas County west to the Indiana border, charges its customers 94 cents per 100 cubic feet.

Shana Eiselstein, a spokesman for the state regulator, said customers in Ohio pay higher prices for natural gas because of three main factors: a lack of quality storage facilities, pipeline service, and the way Ohio allows providers to adjust their costs.

"Michigan has the most underground storage [capacity] of natural gas in the nation," Ms. Eiselstein said.

The extra storage allows Michigan utilities to buy more gas at lower rates and store it cheaply until it is needed.

Because of both geology and business decisions made decades ago, Ohio utilities such as Columbia Gas must buy more of their gas on the spot market during the winter months, when prices are higher.

Michigan utilities are also able to take advantage of cheaper transportation rates for their gas supplies, which come mostly from Canada. In contrast, pipelines deliver natural gas to Ohio from the Gulf Coast, Ms. Eiselstein said.

Michigan regulators also allow gas providers to annualize their gas recovery costs by setting floors and ceilings, whereas Ohio providers adjust their costs monthly, Ms. Eiselstein said.

Chris Kozak, a spokesman for Columbia Gas, said that although comparisons between natural gas prices in Michigan and Ohio are inevitable given the states' proximity, residents should look at their bills with a national perspective: "Nationally, Ohio's rate is 35th, so there are 34 other states that pay more than Ohio for natural gas."

It would be hard to underestimate the savings that come from Michigan's tops-in-the-nation underground storage capacity, he said. "If you look at a glass filled with rocks, that's what Michigan's geology would look like, whereas Ohio would look like a glass filled with sand."

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.



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