Task force looks at propane pricing
Governor’s UP energy panel gathers in Escanaba; first report due in March
ESCANABA — Propane pricing, energy consumer protection and other topics were discussed by members of the U.P. Energy Task Force during a recent meeting in Escanaba at Bay College.
The task force was created by an executive order signed by Michigan Gov. Gretchen Whitmer this summer. Its responsibilities are to:
— Assess the Upper Peninsula’s overall energy needs and how they are being met.
— Formulate alternative solutions for meeting the U.P.’s energy needs, with a focus on security, reliability, affordability and environmental soundness. This includes, but is not limited to, alternative means to supply the energy sources used by U.P. residents, and alternatives to those energy sources.
— Identify and evaluate potential changes that could occur to energy supply and distribution in the U.P.; the economic, environmental and other impacts of such changes; and alternatives for meeting the U.P.’s energy needs due to such changes.
The task force’s final report will be submitted to Gov. Whitmer in two stages. It will first submit a propane plan to the governor by March 31, 2020, which will focus on alternative methods of supplying propane to the U.P. By March 31, 2021, it is required to submit the remainder of its report.
Wednesday’s meeting marked the fifth time the task force had officially met. Task force members heard three presentations over the course of this meeting — the first two delivered via video conferencing.
Joe Potchen of the Michigan Attorney General’s office spoke about his office’s efforts related to a proposed energy pricing protection act.
“While we have the Michigan Consumer Protection Act … we propose even stronger laws to address products like gasoline and propane,” he said.
Michigan Department of Environment, Great Lakes, and Energy Director Liesl Clark — the task force’s chair — noted this proposal is not being recommended by the task force. Instead, Potchen’s presentation was meant to inform task force members about current energy consumer protection laws in Michigan and what the attorney general’s office has been working on.
Potchen spoke about what he described as issues with the existing Michigan Consumer Protection Act, including the limitations of its prohibition of price gouging. As an example, he said that if many gas stations all raised their prices simultaneously, this would not be considered “charging an amount grossly in excess of a price at which similar property or services are sold.”
“There could be other provisions, like anti-trust provisions or something like that, but price gouging may not necessarily be implicated,” he said.
Potchen went on to discuss the language the attorney general’s office is working on. He said the proposal would target excessive price increases after market disruptions.
“We look to fix that by comparing pre- and post-disruption prices, not prices charged at the same time as other sellers,” he said.
The proposed language also includes a presumption that an excessive price increase is an increase of more than 10 percent during a market disruption, unless the increase in question was caused by increased costs. If this is the case, investigation would be able to continue further up the supply chain; Potchen noted the current Michigan Consumer Protection Act only applies to direct sales to consumers.
Warren Wilczewski of the U.S. Energy Information Administration spoke about factors influencing propane pricing in the region.
“There have been a lot of questions from the task force members to understand propane pricing dynamics,” Clark said.
According to Wilczewski, propane infrastructure in the United States has been evolving, meaning companies have been transporting less of their product by rail.
“Producers are behaving in a very logical manner to maximize revenue, and that means looking for markets that provide year-round demand with the highest … ‘net access’ — value to producer minus whatever logistical and processing costs are involved in the moving of the commodity,” he said.
However, demand for propane in Michigan and surrounding areas varies based on the time of year.
“When it comes to the Midwest market, most of the demand continues to come from the residential/commercial and then the agricultural sectors. Both of these are highly seasonal and weather-dependent,” Wilczewski said.
As a result, Wilczewski said the Midwest has been faced with rising propane costs.
“You can no longer count on infrastructure constraints keeping that product in the region regardless of price,” he said.
Wilczewski also spoke about what he said were possible infrastructure constraints at the Enbridge Rapid River Pump Station. He said the station can pull 2,000 barrels worth of propane from Enbridge’s Line 5 oil and gas pipeline per day on average.
“Two thousand barrels of propane may be a whole lot in the summertime — it’s not all that much in the winter, when we look at the market size,” he said.
Representatives of Lansing-based public policy research and consulting firm Public Sector Consultants gave task force members a status update. The firm was hired by the state through a contract with EGLE and the Michigan Public Service Commission to support the task force’s efforts.
Public Sector Consultants’ first goal is to model Michigan’s existing propane supply and distribution system based on existing research. The firm will also identify other ways of meeting the state’s propane needs.
“After developing the model for the existing supply scenarios, we will be coming up with the best-case options to consider in the event that that configuration has to change,” Director Eric Pardini said.
Pardini said Public Sector Consultants is set to finish its final report by Jan. 31, 2020.
“The task force will have an opportunity prior to Jan. 31 to review … findings from our report, and we will make public the report through a presentation to the task force as the project wraps up,” he said.
Members of the public were given a chance to share their questions and comments. One topic of discussion was the Line 5 pipeline.
Marquette resident Jeanne Sekely said she had concerns related to the pipeline’s reliability.
“I do not believe that Enbridge’s Line 5 pipeline can be counted on. The aging line is prone to disruption in the 280 miles it runs between Superior and Rapid River,” she said, adding she would also like to see increased competition in the area’s propane market.
Mary Pelton Cooper of Negaunee expressed fears related to the pipeline, as well. She asked the task force to protect the U.P.’s residents from Enbridge and referred to the Kalamazoo River oil spill, which happened when an Enbridge pipeline burst.
“Please remember that we are all individual consumers — that we are all at risk. 700 miles of shoreline are at risk, and we are stewards of that, all of that. We have to protect it,” she said.
Not every member of the public who spoke about Line 5 during Wednesday’s meeting expressed opposition to the pipeline. Escanaba City Council Member Ralph Blasier responded to claims made in an editorial written by Attorney General Dana Nessel.
According to Blasier, Nessel said the state would move to alternative propane suppliers bypassing Line 5 within two years. Blasier also said Enbridge could get its proposed Line 5 tunnel borne through bedrock in four years, and transporting propane by truck or rail in the interim would be significantly more expensive than continuing to use the pipeline.
“The question is, would it be better to keep Line 5 in commission until they can bore through the bedrock?” he asked.
Jordan Beck can be reached at 906-786-2021 or email@example.com.