SOBE Thermal Energy Systems LLC’s downtown Youngstown customers will see significant increases in the cost for steam heat — 93% for most to take effect shortly and then by 162% more by November.

The Public Utilities Commission of Ohio voted 3-0 Wednesday in favor of the emergency rate increase, recommended by its staff and requested May 21 by John C. Collins, SOBE’s receiver, to keep the troubled utility in business.

Voting in favor of the increase were John D. Williams, Daniel R. Conway and Lawrence K. Friedeman without any comment. Chairwoman Jenifer French and Dennis P. Deters were absent from Wednesday’s meeting.

Collins said Wednesday he needed to review the PUCO ruling before he could comment.

The company’s current monthly income is about $130,000 while its monthly expenses are about $220,000, Collins wrote in a May 27 report with Mahoning County Common Pleas Court.

Collins, receiver since Feb. 17, wrote in the report that “the company is in the midst of a financial crisis” and would no longer be able to pay for three rented boilers it uses for steam heat by September or October without financial assistance.

The PUCO-approved rate increase has seemingly averted that shutdown.

The order from the PUCO after the meeting states SOBE will notify its customers of the rate increase within 30 days of the effective date and a copy of that notice must be submitted to the commission’s Service Monitoring and Enforcement Department at least 10 days prior to its distribution to customers.

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

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

Youngstown City Hall and its police building are among SOBE’s largest customers.

After Wednesday’s ruling, Andy Resnick, city spokesman, said: “Unfortunately this is not a surprise and is the result of PUCO and the state failing to properly regulate SOBE — and our residents and businesses downtown are having to carry the burden. We are continuing to urge and advocate for immediate assistance from the state, and are quickly moving forward with getting a clear picture of what’s under the hood at SOBE so we can reach a long-term solution that works for our city and our residents and businesses on the system.”

Dominic Marchionda, whose companies own Erie Terminal Place and Wick Tower, said the rate increases aren’t sustainable. The buildings are two of SOBE’s largest customers and house residential tenants.

Marchionda said: “It’s concerning for the future of the system. I don’t know how it can be absorbed. For the short-term, I’ll do it for the next year. But long-term, I’ll have to look at getting off the system. It’s unfortunate because when the system is working, it’s great.”

Marchionda said his buildings will see increased costs of about $100,000 annually under SOBE — which he can’t pass along to his tenants. Marchionda said he could buy boilers for about $300,000 to $400,000.

If not boilers, Marchionda said he would look to connect to gas or electric lines for heat for the buildings.

Marchionda said the downtown business owners on the SOBE system will meet shortly to decide what to do.

“It’s time to organize a meeting to regroup and determine what’s best for us,” he said.

The initial June 15 rate hike 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, Collins’ court-appointed attorney, included additional expenses in a June 18 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 Collins, Moran and the PUCO staff.

The additional 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.

With the additions, SOBE’s “operational charge revenue requirement” is $113,149 a month, according to Healey.

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

Of SOBE’s 23 customers, 14 will see a 162% increase for steam heat usage between November and April under the PUCO staff recommendation. One will experience a 163% increase with two paying 85% more. The six others will pay increases 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 will see its current monthly rate from November to April go from $15,066 to $39,460. Another will jump from $11,500 a month to $25,596.

Between May and October, listed as the non-heating season, rates for 13 of SOBE’s 23 customers will increase by 93% with two at 92%, one at 91% and two at 36%. The five other customers will pay between 64% and 86%.

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.

In its Thursday order, the PUCO wrote: “Staff says that it has calculated temporary emergency rates to allow SOBE sufficient monthly revenues for its costs without relying on gift funds, which staff says is the minimum level necessary to avert or relieve the emergency.”

The “gift funds” are $750,000 given to SOBE as part of Enbridge Gas Co.’s $1 million settlement with the PUCO of the 2024 Realty Tower explosion. It is being used to rent two of the three boilers from Power Mechanical Inc. of Newport News. Virginia, with that money running out in September or October. SOBE is renting the third boiler from Power Mechanical using its own funds.

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 in 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.”