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Youngstown Thermal Receiver Meets with Customers

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YOUNGSTOWN, Ohio – The court-appointed receiver in charge of Youngstown Thermal said Thursday there would be no short-term solution to the troubled utility and urged customers to stick it out through this difficult period.

“I’m not going to allow a Band-Aid to be put on this that isn’t long-term,” Reg Martin told City Council’s Public Utilities Committee. “There is no way were going to do anything that allows this to happen again. We’re going to be extremely sensitive to what happens – no short-term approach.”

Businesses, governments and nonprofits downtown were hit last week with surcharges that average between 100% and 120% on their heating and cooling bills. The Public Utilities Commission of Ohio approved the surcharges to help restructure Youngstown Thermal.

Earlier on Thursday, Martin met in the community room of the Covelli Centre with representatives from about 40 customers who wanted to learn more about the surcharges and the direction the company is headed. “This is a sensitive subject, and I wanted to let them know that the receiver cares to make sure it works out correctly,” he said of the meeting.

Just how it is to be solved remains to be seen, Martin noted. The most likely scenario is to build the customer base of the utility and then sell the entity to another operator, he said. Or, the door is open for some form of co-op arrangement among public and private entities.

Third, the city of Youngstown could assume operation of the utility, which Martin said, is the least likely of the scenarios.

Martin said that the financial distress of Youngstown Thermal presents a “unique situation” in that downtown businesses and safety forces depend on proper heating and cooling to keep operating.

He also emphasized that it’s imperative that all customers remain with the system, despite the temporary rate hikes. Should these customers leave, it would only force prices higher and make it harder to turn the business around.

“Time is of essence,” Martin said.

Reg Martin is the court-appointed receiver who is now operating Youngstown Thermal.

Based on recommendations from a staff report submitted July 31, the PUCO approved the surcharges Aug. 2. The rate hikes vary according to customers and range from $100 per month to more than $12,582 per month.

According to the report, the surcharges would be in effect for three months and then be reassessed.

The staff report determined that the surcharges are essential to recover 120% of payroll and health care expenses that Youngstown Thermal was unable to meet. Although the rates were published, the customers were not identified in the report.

Letters were sent out last week informing customers of the rate increases.

Downtown landlord Richard Mills, president of Ohio One Corp., attended the Covelli Centre meeting and said he was impressed with Martin and how he intends to handle the situation.

“His track record – 20 years of experience in the workout and receiver position, and he’s been before the PUCO as a business owner,” Mills said. “He knows both sides and appeared to be fair and open to doing a workout.”

Often, Mills said, the receiver works on behalf of creditors and would normally liquidate assets. “In this situation,” he said, “he’s working for the creditors and the customers because it would be devastating to the customers if they had to fold up their businesses.”

Ohio One Corp.’s RICA and Ohio One buildings receive steam heat from Youngstown Thermal.

Tom Gacse, CEO of the YMCA of Youngstown,  also attended the meeting. He said Martin told those disputing the amount of the surcharges that they can appeal to the PUCO, but must pay the bills for now or risk having their service cut off. “He said he would work with those who are disputing their bills,” Gacse said.

Youngstown Finance Director David Bozanich told council that three city buildings would be affected by the surcharges. City Hall’s heating bill will increase by $2,793 a month, the city-owned 20 Federal Place will see an increase of $5,970 a month, while Fire Station No. 1’s utility bill will jump $421 each month, he said.

“Youngstown Thermal was not bringing in nearly the amount of money it needed to provide services to break even,” Bozanich said.

However, Bozanich said, he’s more at ease with a receiver in place than dealing with the uncertainty of Youngstown Thermal’s operations.

“We applaud the actions of the PUCO,” Bozanich said, and added he looks forward to working with Martin in finding a resolution for downtown customers: “We do see some light at the end of the tunnel, whereas before there was no light at the end of the tunnel.”

Mahoning County Common Pleas Court Judge R. Scott Krichbaum granted a request two weeks ago for the court to appoint Martin as a receiver to handle the assets of Youngstown Thermal. As such, Martin has complete control over the operations of the business and can negotiate with suppliers of natural gas.

The move is unusual, added Mayor John McNally, who noted that this is the first time since the 1950s that an Ohio utility has been placed in receivership.

“This is not something that comes up often,” McNally said. “We all have to work together to make this work out.”

The mayor said that the city is working on some unresolved financial matters it still has with Youngstown Thermal. The company’s former CEO, Carl Avers, maintained that the city owes the utility about $141,000, while the city says Youngstown Thermal owes it $42,000 in unpaid water bills. Avers is no longer with the company.

“We’re going to try to get that stuff worked out so we can help the process as well,” he said. “Reg has asked us to think out of the box as to how to help the system. And that’s something we’ll do. And it’s probably something that all the users of the system have to do as well.”

Youngstown Thermal, a district steam heating utility that supplies energy and heat to downtown businesses, fell into financial distress after it lost its largest customer, Youngstown State University, last year.

The system can operate four boilers, Martin said, but one is sufficient to provide steam heat to all of customers downtown, including YSU. The other three boilers are used for backup.

Fifth Ward Councilwoman Lauren McNally asked whether there were enough customers in the downtown to support Youngstown Thermal’s business.

“Absolutely,” Martin said. “You just show them it’s in their best interests, the community’s best interest and work your butt off to do it.”

Published by The Business Journal, Youngstown, Ohio.