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Another cold winter could fuel energy demand, costs

Ramona Thompson won’t let Mother Nature fool her again.

Last
year the rural Fond du Lac resident says she was complacent about
renewing her fuel contract with her supplier and the deadline slipped
by.

“We had above average temperatures for the past few winters
and I had some propane left in the tank and thought I could get by,”
Thompson said. “Boy, was I wrong. We ended up paying dearly.”

Thompson
wasn’t the only one caught off guard by last year’s perfect storm of
events that triggered a widespread propane shortage. Customers were left
scrambling to fill their propane tanks — often for a king’s ransom. The
crisis also severely tested the capacity of the propane delivery system
throughout the Midwest.

Stephanie Marquis, spokesperson for the
state Department of Administration, attributes the shortage to a number
of factors: prolonged bitter cold temperatures, a pipeline closure and a
spike in propane use for drying a large, wet corn crop.

“At the
end of February people were paying anywhere from $3 to $6 a gallon for
propane,” Marquis said. “I think people were quickly made aware that
those factors not only created a demand in Wisconsin but across the
entire Midwest.”

U.S. Energy Information Administration now
predicts that propane-fueled Midwest households will spend an average of
$120 more this winter to heat their homes than last winter. Aliant
Energy noted that customers used 27 percent more natural gas from
October 2013 through the end of February than they did the previous
winter.

Supplyingthe demand

With the Old Farmer’s
Almanac calling for another brutal winter, suppliers and customers alike
are taking steps to make sure they’re not left out in the cold.

Tom
Cole, owner of Cole Oil & Propane of Lomira, said the colder than
normal winter boosted demand from both residential and business propane
customers. Increased demand quickly depleted stockpiles that were
already low in the Midwest.

“It was a matter of logistics. There
were plenty of propane supplies in the U.S. except here,” Cole said.
“The Midwest was already drained from the corn drying and winter never
let up. They weren’t able to replenish the storage at the terminals,
which in turn led to our storage being depleted down to nothing.”

In order to keep the firm’s 5,000 customers warm, the business resorted to rationing, filling customer’s tanks to half capacity.

Those who contracted fuel earlier in the season at a lower price did themselves a huge favor, Cole said.

“Because
of the spike in prices last year, the number of people we have
contracting (this year) is substantially higher,” Cole said.

His company has added storage capacity and topped off customer fuel tanks during the summer to earn more fuel allocation.

“Right now the propane inventories are about 20 percent higher than they were this time last year,” Cole said.

This
year, inventories are building earlier, but the U.S. Energy Information
Administration (EIA) reports that infrastructure issues — including the
reversal of the Cochin pipeline — and limited capacity of storage
facilities could impact the supply again this winter.

The propane
crisis spurred legislators, including Sen. Tammy Baldwin, D-Wisconsin,
to craft the Propane Supply and Security Act of 2014. The bipartisan
bill is designed to help prevent and better manage shortages.

Harvest woes

Producers
and cooperatives across the country will soon be firing up grain dryers
to dry down the corn crop. A record corn harvest — estimated at 14.4
billion bushels — is expected to put pressure on propane supplies.

Barring
a string of warm, sunny days through November, Fond du Lac County
farmers will need to pay drying costs thanks to another cold, wet spring
that delayed the planting season, said Fond du Lac County Crops and
Soils Agent Mike Rankin. While farmers throughout the Midwest are
anticipating a bumper crop, Rankin said that’s not the case locally.

“This part of the state took a real hit … in June with all the rain,” Rankin said. “You just can’t recover from that.”

With so much corn expected to flood the market, corn prices has been falling while the cost to dry the harvest has been rising.

“Drying
corn is a major cost especially in a year where it’s pretty clear that
corn’s not going to get down under 20 percent standing in the field this
fall,” Rankin said. “Corn is selling just below $3 a bushel, that’s
down about $1.50 from last year. Unfortunately, there will be farmers
selling their corn below the cost of production.”

Dealers and customers have moved to buy propane ahead of time.

“We’re
alerting our members to make sure that they’re filing early or they’ve
got their contracts secured for the harvest,” said Tom Thieding of the
Wisconsin Corn Growers Association.

Counting the cost

According
to the EIA’s Winter Fuels Outlook report, the average cost of home
heating is projected to increase by 7.5 percent this winter, with the
highest increases for those using propane (36.3 percent). In Wisconsin,
the cost of a gallon of propane spiked at $5.80 on Jan. 27, 2014. The
cost has since dropped to around $1.60 locally.

Those heating
homes with natural gas can expect an average increase of 7.6 percent,
while those using electricity will be affected by a 4 percent increase.

Bob
Flood, owner of Flood Oil Co. in Eden, said his fuel oil customers
enjoyed an uninterrupted fuel supply as well as stable prices.

“Right now fuel oil is cheaper than it’s been in the last five years,” Flood said.

According
to the Wisconsin Winter Heating Fuel Prices Summary, a gallon of
heating oil is priced at $3.56, with local prices averaging around $3.21
per gallon.

Those depending on fossil fuels to heat their homes
often try to reduce their fuel bills by introducing alternative heating
sources. The use of cord wood and wood pellets as the primary
residential space heating fuel has increased nearly 40 percent since
2004, to about 2.5 million households in 2012, according to the EIA.

Dorothy
Klumb says her family has spent nearly $5,400 to improve the efficiency
of their century old farmhouse. The Fond du Lac family spends about
$500 a month on fuel oil to run the boiler furnace which keeps the
two-story behemoth at a mean temperature of 62 degrees in the cold
winter months.

“We have a wood stove in the basement that also
helps to heat our home,” Klumb said. “We spent over $1,500 on a semi
filled with 8-foot oak logs that we split ourselves.”

Without wood, Fond du Lac resident Aimee McCarty said it would cost $500 a month to heat her 3,500-square-foot house.

“And that’s in an average winter month,” McCarty said. “Thankfully, we had plenty of wood during the insane cold snap.”

Those
not interested in chopping wood may choose to heat main living areas of
their homes using a wood pellet stove. Justin Marchand, salesperson at
Earth Sense Energy Systems in Oshkosh says his showroom is filled with
customers scared of skyrocketing fuel prices.

“We’ve probably
doubled what we’ve sold over what we saw this time last year,” Marchand
said. “We have people telling us that they’ve reduced their energy bills
by 40 to 75 percent by burning wood pellets.”

Polar vortex redux

The
winter of 2013-14 was one of the coldest in recent memory for
Wisconsinites. Many fear a return visit of the polar vortex, a weather
phenomena that blasted the Midwest with arctic air masses that kept
temperatures below zero for half of January.

And depending on the
track and intensity of El Nino and the southern Jet Stream the Badger
state could be in for another long, cold winter — or not.

“Based
on the Climate Prediction Center, as of right now, we are expecting the
development of an El Nino. However, it’s been a little slow to get
going. Based on that forecast, there’s a 73 percent chance of near or
above normal temperatures for the winter,” said National Weather Service
Meteorologist Sean Miller. “A strong El Nino would prevent us from
having as many cold intrusions from the north.”

Miller said that the developing El Nino is not expected to be a strong one.

“So it may not be quite as mild a winter as we would like,” Miller said.

According
to the 2015 edition of Farmers’ Almanac, winter will bring colder than
normal temperatures for three-quarters of the country — with the most
frigid temperatures funneling across the Great Plains into the Great
Lakes. The publication’s long-range prediction calls for the coldest
outbreak of the season to arrive late in January into February, when
bitter cold arctic air pushes across the Great Plains, dropping
temperatures to record lows.

On a brighter note, the almanac is calling for normal snowfall.

“I
learned my lesson last year,” Thompson said. “I’ve got my fuel lined
up, extra quilts for the bed and my heavy winter coat at the cleaners.”

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