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YOUNGSTOWN -- At the urging of Youngstown Mayor Derrick McDowell, Gov. Mike DeWine's office is looking at possible options to save the troubled SOBE Thermal Energy System LLC, which provides steam heat to a majority of downtown, but there's a long way to go in the process.
Dan Tierney, DeWine's spokesman, said: "It's fair to say the governor's office continues to have discussions with the mayor's office, the receiver and legislators. Nothing is final and discussions are ongoing."
Tierney added: "The governor wants the same thing that everyone wants - that the customers have heat this winter. We're continuing to have discussions to make sure that happens."
Tierney told The Vindicator in June that the governor's office wouldn't bail out the utility company with funding from the state's capital budget or its rainy day fund. That is still the case, but McDowell has talked with DeWine and his staff about other options to provide state money to save SOBE.
Andy Resnick, the city's spokesman, said: "As the largest customer on the system, our approach has been deliberate and strategic in collaborating with all parties, including ongoing advocacy of the state. Our objective remains quickly finding a long-term solution that guarantees reliable heat this winter and safeguards our residents and the businesses on the system."
The talks with the governor's office picked up after the U.S. Department of Energy shut down a June 30 proposal by U.S. Sen. Bernie Moreno to obtain federal loan guarantees to help SOBE customers get their heat and hot water elsewhere because the agency has a $250 million requirement for loan guarantees. That is far more than what is needed for SOBE's 23 downtown customers.
The Vindicator reported July 17 that another option to get SOBE customers off the system was proposed involving the state treasurer's Buckeye Business Advantage linked deposit program with the 7 17 Credit Union loaning the money needed to Brewer-Garrett Co. for five years at ideally no interest.
For those using Brewer-Garrett, the company was to install heating systems in any of the buildings on the SOBE system with the cost paid over a period of up to 20 years through an additional heating rate or a separate service fee. Then, the customers would have the option to buy the boilers at an amortized rate.
Treasurer Robert Sprague wrote in an Aug. 5 letter to McDowell and DeWine: "It seems as if a solution is now in the works, and we will defer to your offices and other elected officials on the next steps. We thank you for your work and leadership in helping to resolve this issue. Moving forward, the Ohio treasurer's office remains willing to provide assistance through the Buckeye Business Advantage program."
Sprague didn't close the door on any SOBE customer using his office's program, but acknowledged that "this enhancement is well in excess of our normal programmatic parameters."
Laura Martine, a Sprague spokeswoman, said: "There's been some solutions discussed between the mayor's office and the governor's office. We're happy to help, but there might be another solution."
While discussions are ongoing, nothing has been finalized on DeWine's end to help SOBE.
It would cost about $13 million to build back SOBE's plant, according to John C. Collins, its receiver since his Feb. 17 appointment.
To replace SOBE's underground distribution pipes would cost about $17 million, but Collins said he, the Public Utilities Commission of Ohio and others don't believe "that is necessary" and the underground pipes are in good working order.
SOBE's plant was gutted in 2022 when David Ferro, the company's CEO, razed the boiler house and sold the three boilers for scrap. Ferro then had the company lease a boiler, but stopped paying the monthly rental fee with it possessed on Sept. 30. He abandoned the Youngstown plant with a judge appointing Reg Martin on Sept. 26 as SOBE receiver. Collins replaced Martin, who faced criticism and scrutiny from SOBE customers, as receiver.
Guy Coviello, president and CEO of the Youngstown/Warren Regional Chamber, said of DeWine's potential assistance: "I know they were trying to figure out a way to help the system through the state. The mayor is diligently trying to save the system. The governor's office is looking for state funding to save the SOBE system. The mayor's strong commitment to working with the governor's office is moving the needle. But I don't know if anything is imminent."
Coviello said the option through 7 17 and Brewer-Garrett still exists.
Because of the failed DOE plan and then the treasurer's program, DeWine's office wasn't as engaged in trying to bail out SOBE as it had previously been. But it is more focused on finding funding for SOBE though no commitments have been made.
If the state provides funding, it may be for a smaller SOBE system that doesn't serve all of its current 23 customers.
A number of the customers are looking to get off the SOBE system after a huge emergency rate increase went into effect June 30. Most SOBE customers are paying a 93% increase with an additional 162% increase for most of them from November to April.
Without the emergency rate increase, which is being contested by the city of Youngstown and the Office of the Ohio Consumers' Counsel, SOBE would have been unable to make its payments by September or October.
There is a sense of urgency to get this matter resolved before DeWine leaves office on Jan 11 because the city and SOBE would have to essentially start from scratch with a new governor.
McDowell is seeking options to save the SOBE system.
To have all 23 customers leave the SOBE system at the same time - or staggered over a few months - seems like an impossibility as some cannot afford to buy or rent their own boilers and digging up downtown for installation would be a logistical nightmare.
City council agreed June 17 to McDowell's request to pay up to $130,000 to the Roetzel & Andress' Akron law office for a study that will offer long-term solutions for SOBE.
Roetzel is working with Marc Divis, president of Akron Energy Systems, who was largely responsible for bailing out steam system problems in Akron and Cleveland.
The final report is expected in September or October.
At that same June 17 meeting, council voted in favor of 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."
The resolution seeks the intervention of DeWine, the PUCO, the General Assembly, the Ohio Department of Development "and all appropriate state agencies (to) immediately evaluate and implement all available emergency measures, funding opportunities, grants, loans, infrastructure programs and other resources necessary to preserve utility service to downtown Youngstown."
To cut costs, SOBE returned two of its three rented boilers two weeks ago until October. The return of the two boilers will reduce the company's monthly expense for the boilers from $58,200 to about $28,000.
Also, SOBE came to a $750,000 settlement with Enbridge Gas Co. for unpaid gas bills.
Enbridge billed $1,999,656.95 for unpaid bills when Reg Martin, SOBE's previous receiver, made only two partial payments to the company after taking over a company on Sept. 26 that was nearly in receivership under its previous owner.
SOBE will pay $40,000 a month for 18 months until the bill is paid off. That's on top of its monthly Enbridge gas expenses.