When the Public Utilities Commission of Ohio meets today to consider a significant emergency rate hike for SOBE Thermal Energy Systems LLC’s downtown Youngstown customers, the increases will be even higher than proposed just last week.

The initial June 15 recommendation by Christopher Healey, PUCO’s Rate and Analysis Department’s chief of accounting and finances, on behalf the agency’s staff, recommended most SOBE customers pay a 145% increase from their current rates from November to April, when steam heat is primarily used, and 75% during the rest of the year.

But after Michael J. Moran, the court-appointed attorney for SOBE receiver John C. Collins, included additional expenses in a Thursday filing with the PUCO, Healey recommended in a Monday filing to request the PUCO approve a rate increase of 162% for 14 of SOBE’s 23 customers between November and April, and 93% for the other six months for 13 of the utility company’s customers.

The emergency increases are needed to help SOBE, which provides steam heat to a majority of downtown Youngstown buildings, from going out of business in a few months, according to the PUCO staff.

The additional requested rate increase includes $55,570.31 owed to SOBE’s previous receiver and legal counsel that was supposed to be paid by June 14. That amount will be paid by SOBE customers over a six-month period if the PUCO grants the request.

The other expenses include a $2,221 monthly increase in water and sewer bills, a $4,752 monthly increase for SOBE staff payroll and benefits, and a $228 monthly increase in Ohio Bureau of Workers’ Compensation premiums, according to Healey’s report.

Healey wrote: “Staff recommends approval of emergency rates as set forth in the staff report and as modified in this response to the receiver’s comments. The net result of staff’s recommended changes is that the operational charge revenue requirement is $113,149.”

That monthly calculation was $96,686 in Healey’s June 15 recommendation.

Of SOBE’s 23 customers, 14 would see a 162% increase for steam heat usage between November and April under the PUCO staff recommendation. One would experience a 163% increase with two paying 85%. The six others would pay between 123% and 159%.

Before the adjustment, 14 would have paid a 145% increase, one would have paid 146% with two paying 73% more. The others would have paid between 108% and 137% more during that time.

The PUCO staff report shows one customer would see its current monthly rate from November to April go from $15,066 to $39,460. Another would go from $11,500 a month to $25,596.

Between May and October, listed as the nonheating season, rates for 13 of SOBE’s 23 customers would increase by 93% with two at 92%, one at 91% and two at 36% under the PUCO staff recommendation. The five other customers would pay between 64% and 86% if the PUCO approves the increase.

Before the revision, the rate increase was proposed at 75% for 14 SOBE customers, 76% for one and 24% for two. The rest were to see increases of 49% to 74% prior to the adjustment.

Healey’s report blacks out the specific names of the customers next to the proposed rate increases, what they currently pay and what they would pay if the PUCO approves the emergency hikes.

Among SOBE’s largest customers are Youngstown City Hall and police building; Wick Tower; Erie Terminal Place; the Ohio One Building; FNB Youngstown LLC, which is developing Metropolitan Tower; and 22 Market Street Ohio LLC, which is developing the former Mahoning National Bank Building.

The emergency rate increase could go into effect as soon as the next bill.

Healey wrote in a Monday filing with the PUCO: “Staff reiterates the emergency rates are to be ‘granted only at the minimum level necessary to avert or relieve the emergency.’ Any additional increases the monthly budget used to set rates will further impact customer bills, which are already projected to increase significantly.”

Because several SOBE customers do not have working meters, Healey wrote in his June 15 report: “It is currently not feasible to establish emergency rates based on actual usage” so proportional rate increases are needed. Healey wrote that the PUCO staff recommends Collins “continue to prioritize the replacement of missing and unreliable meters” and have them installed no later than Oct. 1.

Healey’s report states that once SOBE can collect accurate data regarding usage, a base rate increase can be established. Healey said PUCO staff isn’t recommending a strict deadline “at this point” for SOBE to “file a base rate case.”

Instead, PUCO staff wants monthly reports from Collins, SOBE receiver since Feb. 17, on the installation of meters; an accounting of expenses, including natural gas costs to Enbridge Gas Co.; an “accounting of revenues being generated by the approved emergency rates on a customer-by-customer basis;” any information regarding additional funding sources for SOBE; a status update on alternatives to renting boilers and any other information Collins “believes might assist staff and the commission in developing a long-term solution to SOBE’s financial situation.”

FINANCIAL WOES

Collins filed the request as an emergency on May 21 with the PUCO directing its staff six days later to prepare a report so it can consider the rate increase.

In a May 27 court report, Collins wrote the company’s monthly income is about $130,000 while its monthly expenses are about $220,000.

Its regular expenses for payroll and materials is about $80,000; rent for three boilers to provide heat to its customers paid to Power Mechanical Inc. of Newport News, Virginia, is $58,200; and “anticipated monthly payments” to Enbridge Gas Co. for gas is $80,000, Collins wrote.

Collins said, “The company is in the midst of a financial crisis” and will no longer be able to pay for three rented boilers it uses for steam heat by September or October.

Except for two partial payments made before he was appointed receiver and a recent payment of a $96,000 bill, Collins said Wednesday that the Enbridge monthly bills weren’t paid between about August or September 2025 to April.

Because of the late bills, Enbridge charged the maximum amount for a period of time and the amount owed is as much as $1,999,656.95. But Collins said Enbridge is working with SOBE and the bill could be reduced to “in excess of $500,000,” to be paid over an 18-month period. Healey wrote PUCO staff assumed a $750,000 amount to be repaid over 18 months.

Reg Martin, who served as SOBE’s court-appointed receiver from Sept. 26 until being replaced by Collins on Feb. 17, used $750,000 he received from Enbridge as part of that company’s settlement of the 2024 Realty Tower explosion to rent two of the three boilers. SOBE is renting the third boiler from Power Mechanical using its own funds.

However, numerous problems with the three boilers caused them to not provide heat during periods in January and February during the coldest time of the year with temperatures below zero degrees in February.

In Healey’s Monday report, he wrote: “Staff notes that it is recommending that these emergency rates go into effect before the receiver projects that all gift funds will be exhausted. This may provide some leeway for the receiver to address natural fluctuations in monthly operating expenses. Finally, if SOBE resolves its pending complaint case with Enbridge Gas on favorable terms to SOBE — more favorable than the estimates used in the staff report — this may provide additional financial stability for SOBE while emergency rates are in effect.”

In Healey’s June 15 report, he wrote: “Mr. Collins stated in his motion that based on current financial conditions, it is likely the gift will be exhausted by September or October. Without additional revenues, SOBE will be unable to provide service to its customers. And because there is no provider of last resort, a ‘failure to continue to provide heating services will cause enormous harm and damages to many of the businesses in the downtown Youngstown area.'”

For the calculations, PUCO staff used a gas cost of $3.259 per MCF (1,000 cubic feet).

Youngstown City Council on June 17 agreed to pay up to $130,000 to Roetzel & Andress, a law firm in Akron, for a study that will offer long-term solutions to the SOBE issue and approved a resolution declaring the “existence of a local energy and public utility emergency arising from the financial crisis” of SOBE and “urging immediate intervention and assistance by the state of Ohio.”

Gov. Mike DeWine is monitoring the decision, but has rejected requests by Mayor Derrick McDowell for SOBE to receive state rainy day funds and from the recently-passed capital budget.

The study will take about three to four months to complete, McDowell said.

This is the second time SOBE, formerly Youngstown Thermal, is in court receivership since 2017 because of financial issues and mismanagement.

David Ferro, SOBE’s CEO, decided in 2022 to scrap three coal-fired and one gas-fired boiler at the Youngstown location, 205 North Ave., and demolish the boiler house “leaving in its place a massive hole in the ground, and he took no steps to remediate this potential nuisance,” Collins wrote in a May 27 report to a Mahoning County Common Pleas Court judge.

Under Ferro’s leadership, SOBE entered into a lease agreement for an 800-horsepower boiler, but stopped making monthly payments, owing $383,214 to the company before the boiler was repossessed Sept. 30. That left SOBE without any way to provide steam heat to most of downtown until Martin rented the three boilers.

When Ferro abandoned the business, SOBE owed about $4 million to creditors.

It is the oldest district heating and cooling system in the country, having begun operations in 1895. It was designed to generate and distribute steam to heat downtown businesses using coal as its main source of fuel.