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YOUNGSTOWN — SOBE Thermal Energy Systems LLC sent disconnection notices to four of its downtown Youngstown customers that haven't paid their bills in at least the past 60 days.
The disconnection notices state service may be disconnected as soon as Friday. The steam heat to the four buildings won't be cut off Friday, but the disconnections would likely occur the week of Oct. 5, unless payments are made, said Michael Moran, attorney for John C. Collins, SOBE's receiver.
Those receiving disconnection letters were West 34 Investors LLC, the owner of Wick Tower; Erie Terminal Place LLC, which owns Erie Terminal Place; 22 Market Street Ohio LLC, which is developing the former Mahoning National Bank building; and FNB Youngstown LLC, which owns the First National Bank Building, also known as Central Tower.
The four properties haven't paid their SOBE bills, which included a major rate increase as of June 30, in the past 60 days, with some being longer than that, Collins and Moran said.
Moran said Tuesday: "Mr. Collins came to the conclusion that we'll have to do a disconnect if we don't get paid by the users. We can't keep funding them. At this point, we don't know of any solution to this problem."
SOBE sent disconnection notices to Wick, 22 Market and FNB on June 8 because of a lack of payment. But those disconnections weren't carried out and the Public Utilities Commission of Ohio approved major rate increases June 24, which took effect six days later, for SOBE customers in an effort to bail out the troubled company.
However, Collins said a majority of its 23 downtown customers are at least 30 days' late with their payments so the rate increases haven't helped SOBE.
Collins said: "We are struggling mightily to continue to operate and if people don't pay, we can't provide services to them. These people haven't paid and we can't continue to provide steam heat to people who didn't pay."
Moran said: "Our position would change dramatically if they paid."
For 13 of the SOBE's 23 customers, the emergency rate increase for the non-heating season between May and October, was 93% with two at 92%, one at 91% and two at 36%. The five other customers are paying between 64% and 80% more.
Between November and April, the rate will increase by another 162% for 14 of SOBE's 23 customers. One will pay 163% more during those six months with two paying 85% more. The six others will pay increases between 123% and 159%.
Dominic Marchionda, whose companies own Wick and Erie, said he is willing to pay the increases, but his buildings were billed for far more than 93%.
Marchionda said Erie Terminal was paying about $750 to $800 a month before the emergency rate increase, and is now being charged nearly $13,000 a month - and it's during a time when that building isn't using any steam heat.
SOBE records show Erie Terminal owes $25,735.18 for the past two months - $12,826.69 for its most recent bill and $12,908.49 for the previous bill.
Marchionda said: "All I'm asking for is an explanation on how these amounts were calculated. Show me how they were calculated and I'm ready, willing and able to pay. If my average bill was $800 a month, how does it jump to nearly $13,000? I'm not trying to be unreasonable. I asked them to give a complete breakdown and I'll pay it. I'll put it in escrow. I want to pay even more than my fair share, but don't just throw out a number there. My fair share is not paying the crazy amount they say I owe."
Gregg Rossi, attorney for Wick and Erie, filed a motion in Mahoning County Common Pleas Court to intervene in a case involving SOBE's receivership limited to "matters that directly affect continued steam service, customer payments, disposition or abandonment of system assets, use of operating revenue and other relief within this court's receivership jurisdiction."
Rossi said: "The purpose of the motion to intervene was to get notice of what the receiver is doing. If we get intervenor status, it gives us a better opportunity to know what's going on and have the opportunity to be heard and perhaps take injunctive relief if necessary.
Erie and Wick each have 40 residential units in addition to commercial space.
"We've got a potential threat to disconnect," Rossi said. "We could potentially get relief through the court."
SOBE records show for the past 60 days, Wick owes $10,752.72, 22 Market owes $12,360.75 and FNB owes $7,947.86.
Of SOBE's 23 customers, which make up a majority of downtown, only 10 are current with their payments. Of the remaining 13, Collins said four or five are still paying the old rate before the emergency increases. That includes the city of Youngstown for city hall-police station.
As of Tuesday, nonpayments from SOBE customers that were up to 30 days late totaled $103,393.81, according to a report provided by Collins.
Overall, customers owe $470,817.30 to SOBE in delinquent payments. But Collins and Moran said they don't expect to get that money, which is several months late with a large part owed before the two started Feb. 17 with SOBE. For example, Erie Terminal is said to owe $119,439.84 from a disputed project from more than a year ago.
There is no information to prove that amount is actually owed so Moran and Collins said SOBE isn't seeking it and doesn't expect to ever receive it despite it still being counted as delinquent.
'OUT OF BUSINESS IN 90 DAYS'
SOBE's financial situation is so perilous that Collins said: "We're going to be out of business in 90 days at the most unless someone comes in and helps us. We need operating capital to keep us going through the spring and summer of 2027 and nobody has done that. There are things in the works and there are possibilities, but nothing is concrete."
In a Sept. 2 filing with Mahoning County Common Pleas Court, Collins wrote SOBE's monthly income between May 1 and Aug. 27 was $100,592 with regular monthly expenses of $80,000.
But that doesn't include the $40,240.25 SOBE has to pay Enbridge Gas Co. monthly for 18 months for past due bills that were negotiated down to $724,324.42 from $2,226,662.62 as well as regular gas bills and boiler payments.
Those payments to Enbridge were supposed to start in August, but Moran said SOBE still doesn't have the money to give the utility company so there's been no payments
"We can't make an Enbridge payment," he said. "We're very concerned about being able to operate. When we made the deal, we presumed people would pay. That hasn't happened."
Collins said, "It's a possibility that Enbridge shuts us down. The emergency tariff was designed to pay all current and back Enbridge payments. But that hasn't happened - not by a long shot. We're in worse financial straits now than we were before the tariffs were approved. That trouble may mean we're not able to operate this utility, which would be a tragedy and a disaster for Youngstown and Mahoning County."
Moran added: "We're concerned. We're extremely concerned."
SOBE returned two rented boilers in late July-early August and kept one large 800-horsepower boiler, reducing that monthly cost from $58,000 to $28,400.
But Collins said SOBE is going to have to rent another 800-horsepower boiler in the next seven to 10 days to meet customers' needs, which will double its current boiler costs.
SOBE had $117,422.11 left as of Sept. 2 from a $750,000 payment given to the company by Enbridge as part of the gas company's $1 million settlement with the PUCO over the Realty Tower explosion investigation. SOBE uses that money to lease the boilers that provide steam heat and hot water for its downtown customers.
SOBE has to make another $28,400 payment Friday, Collins said.
When the second boiler is delivered and installed, Collins said, "We'll have three months at the most" left from the Enbridge settlement fund to pay for the boilers.
In his Sept. 2 report to the court, Collins wrote: "The only company that has showed continuing interest in coming to some kind of arrangement" to buy SOBE is Detroit Thermal, a subsidiary of Carter Energy.
There's been "several meetings" between SOBE and Detroit Thermal officials, Collins wrote, and the latter has also met with SOBE customers, the city of Youngstown and PUCO representatives as well as visited the Youngstown site to inspect the company's assets.
Detroit Thermal hasn't submitted a written proposal, but Collins wrote Rick Pucak, its general manager, told him "the company is in discussions with all interested parties and may be submitting a proposal within the next month."
Moran said Tuesday, 20 days after Collins' report to the court, that SOBE hasn't "received a written proposal from Detroit Thermal. We've heard ideas. One of the problems is the ideas don't address the capital improvements to have someone come in, manage and operate the company. I haven't heard anyone talk of Mr. Collins' immediate problems."
Mayor Derrick McDowell is trying to convince Gov. Mike DeWine to provide state funding through an allocation from the State Controlling Board.
That hasn't been successful. The board next meets Monday. There is no funding request for SOBE on its agenda.
There are also discussions with the state treasurer's office to use its Buckeye Business Advantage linked deposit program. That also isn't finalized.
McDowell is trying to obtain $1,674,000 to stabilize the plant as listed as Phase I in a study commissioned by the city. That study, which cost up to $130,000, was done by Roetzel Consulting Solutions.
Phase II is redevelopment to "rebuild the system's production capacity, fix the distribution network's specific, identified deficiencies, and install accurate, modern metering for every customer - putting the system into a stable operating condition for years to come."
The report states that before Phase II begins, the "system's ownership must be transferred" to either the city or SOBE's customers.
Phase II provides two options: a new on-site plant at a cost of $20,099,828 or purchasing an expanding Youngstown State University's current plant at a cost of $24,445,759.
The Vindicator reported Sept. 10 that John P. Hyden, YSU's associate vice president for facilities and support services, said the university's steam plant "is absolutely not for sale. I'm not giving that up." Hyden said YSU's system couldn't accommodate SOBE's customers should the company go out of business.
Roetzel's Phase III would be to spend $4,283,577 reinvesting in the system once it is in "sound operating condition."
That includes replacing the combined administration-shop facility and the chilled-water cooling plant.