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YOUNGSTOWN -- With SOBE Thermal Systems LLC's receiver saying the troubled utility company will be out of money and out of business no later than November without an infusion of money or a buyer, talks started back up with the state treasurer to help its downtown Youngstown customers.
Treasurer Robert Sprague's office reengaged in discussions in the past week with SOBE customers, including the city of Youngstown, Laura Martine, the treasurer's spokeswoman, said Wednesday.
Andy Resnick, the city's spokesman, said: "The SOBE matter remains a top priority for the administration, especially with winter just around the corner. We have had positive conversations recently with state officials to coordinate on a path forward and believe we are close to finding a solution that will not only provide customers with reliable heat this winter, but creates a viable long-term solution as well."
The Vindicator reported July 17 that the treasurer's office offered the use of its Buckeye Business Advantage linked deposit program with the 7 17 Credit Union loaning the money needed directly to SOBE customer or through Brewer-Garrett Co. for five years at ideally no interest with the company installing heating systems in any of the 23 downtown buildings on the SOBE system.
With Mayor Derrick McDowell discussing possible options with Gov. Mike DeWine to save the SOBE system, Sprague wrote the two on Aug. 5: "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."
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."
But with no concrete plan finalized with the governor's office, talks resumed with the treasurer.
Barb Ewing, CEO of the Youngstown Business Incubator and a SOBE customer, said Wednesday: "The mayor has been able to communicate with the treasurer's office because of serious concerns with the weather turning and the timing of any assistance from the state or federal government. There's a very real short-term solution that needs to be addressed. Treasurer Sprague is willing to have those conversations."
In an Aug. 13 letter to DeWine, McDowell requested he put the city's request for state assistance for SOBE on the agenda for the next State Controlling Board meeting, which was four days later, but after the submission deadline.
The next State Controlling Board meeting is Monday. There is no request for SOBE funding on that agenda.
The board meets again on Sept. 28.
McDowell wrote: "Every additional delay narrows the window to complete the necessary work stated in Phase I in time and I do not want downtown Youngstown to face a second consecutive winter without a reliable source of heat."
McDowell was referring to a report of the SOBE system from Roetzel Consulting Solutions. City council agreed June 17 to pay up to $130,000 for the study that offers long-term solutions for SOBE.
The study calls for an investment of $26.06 million or $30.4 million over time in the SOBE facility with the recommendation that either the city or the utility's customers take ownership of the plant and have it run by a third-party.
Phase I to stabilize the plant would cost $1,674,000 and have that money secured no later than this month through local, state and federal funding, according to the Roetzel study. That is what McDowell wants from the state right away.
The study states the funding would be used to "address the specific safety, reliability and interim measures identified during the site assessment - training, equipment and repairs the system needs now, this year, regardless of which long-term path is chosen."
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.
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. It's too important for the sustainability of the university. We hope for the long-term sustainability of downtown, but it won't include someone owning our plant."
YSU got off the downtown steam system in 2016 after building its own boiler plant.
Hyden said YSU's system couldn't accommodate SOBE's customers should the company go out of business.
Hyden said: "It would take a lot of modifications to operate that system. We're in the business of public education and not being a public utility."
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.
RECEIVER REPORT
The reengagement with the treasurer's office comes around the same time as a Sept. 2 report filed by John C. Collins, SOBE's receiver since Feb. 17, with Mahoning County Common Pleas Court that paints a dire financial picture for the steam heat company.
Despite getting approval June 24 from the Public Utilities Commission of Ohio for huge emergency rate increases to help its finances, Collins reported the hikes have "not made an appreciable difference in the income being generated by the company."
That's because, Collins wrote, of SOBE's 23 customers, which make up most of downtown, seven didn't pay their July 31 invoice -- with the new rates taking effect June 30 -- and three made partial payments, including the city of Youngstown and the city school district, which only paid the old rates.
For 13 of the SOBE's customers, the emergency rate increase is 93% with two at 92%, one at 91% and two at 36%. The five other customers are paying between 64% and 80% more.
That is for the non-heating season between May and October.
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%.
"Customers who have not been paying their invoices continue to significantly contribute to the financial problems of the company," Collins wrote.
The nonpayments that were up to 30 days late as of the court filing totaled $110,055.72, Collins wrote. Overall, customers owed $417,101.23 to SOBE in delinquent payments, according to Collins.
SOBE's monthly income between May 1 and Aug. 27 was $100,592 with regular monthly expenses of $80,000, Collins wrote.
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.
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 wrote SOBE will have to rent another 800-horsepower boiler later this month or October to meet customers' needs, which will drive up costs.
SOBE has $117,422.11 left 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.
Collins wrote that the fund will be depleted in November.
"At that time, the company will not be able to make the lease payments for the boilers, both the current and agreed arrearage to Enbridge (for gas bills) and all other expenses of the business," Collins wrote.
Collins wrote that without money from a governmental entity - he listed the federal, state, Mahoning County, Youngstown "or other agency" - "SOBE Thermal will not be able to pay its expenses beginning sometime in November, if not before."
If the emergency rates are not paid and no public funding is provided, Collins wrote he "may be required to seek authorization from the PUCO to allow abandonment of the steam pipelines and the facility."
David Ferro, SOBE's CEO, walked away from the Youngstown facility in September 2025 with it on the verge of insolvency and not paying several of its bills for months. A rented boiler that SOBE was using to provide steam heat to its downtown customers was repossessed Sept. 30 after SOBE failed to pay fees for several months.
Reg Martin was appointed receiver on Sept. 26 and eventually rented three boilers, though they failed at times in January and February, during the coldest periods of the year, including for days when the temperature was below zero.
Collins replaced Martin on Feb. 17 after numerous SOBE customers complained about the latter.
DETROIT THERMAL
Collins wrote in his latest court report that he's been contacted by "several companies over the last six months showing some kind of interest in either purchasing the company or operating the company."
But, he wrote, "the only company that has showed continuing interest in coming to some kind of arrangement" 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."
The Roetzel report, paid by the city, states: "The system does not generate the volume or margin a for-profit owner needs to justify the capital risk of owning and financing it - which is precisely why the for-profit, single-source ownership model…prices its service at a premium over cost and why the current owner's court-ordered receivership exists in the first place."
It added: "This report recommends the city of Youngstown pursue one of two ownership structures instead: direct public ownership by the city or a customer-owned cooperative in which the connected buildings themselves hold governance and financial responsibility for the system."
The study recommends a third-party operator be hired to run the system on a fixed annual or monthly fee.
This would be a less-costly option than having a for-profit company run SOBE, the study states.
McDowell said on June 1 that the city taking over SOBE was not a "viable option." Other city officials, including past mayors, have also rejected having the city run SOBE.