YOUNGSTOWN, Ohio – A meeting between downtown customers of SOBE Thermal Systems LLC and the company’s court-appointed receiver became heated Wednesday, as representatives of the city took issue with how the utility has handled disruptions in providing steam heating services to businesses and residents.
Reg Martin, the receiver for SOBE, had called the meeting to inform customers of steps the company is taking to mitigate these disruptions, including efforts to secure a backup system to ensure reliable service throughout the winter.
To do that effectively, Martin urged those who are current customers to remain on the system and keep paying their bills.
“That sounds like extortion,” Nikki Fields, chief of staff for Mayor Jamael Tito Brown, told Martin. “You knew this system was not functioning for years, and between you and the PUCO [Public Utilities Commission of Ohio], you’ve known this and there’s been no plan for maintenance. Now it sounds like you’re deflecting on to the city.”
Fields, Brown and city Finance Director Kyle Miasek were among city representatives who attended the meeting, held at the downtown YMCA’s Manchester Room. Another 30 or so attendees represented businesses and organizations that use SOBE for steam heat.
“Extortion is an illegitimate term to use,” Martin said. “We have a situation where we need to have funding for it.”
The city’s five downtown buildings use SOBE for steam heat.
Heating service was disconnected Sept. 30 after the utility failed to make payments on a boiler it leased from a Chicago-area company. A court had ordered in August that the company had the right to repossess the unit.
Martin was appointed by a Mahoning County Common Pleas Court on Sept. 26 as receiver to manage the business affairs of SOBE Thermal.The district heating company serves 28 customers downtown, and Martin said three of those that use steam heat were adversely affected after SOBE’s boiler was repossessed.
SOBE has since secured a mobile boiler unit to temporarily replace the one repossessed, and that boiler is now operational, despite glitches that caused the system to crash temporarily last week.
However, the smaller boiler isn’t sufficient to sustain service throughout the winter, and Martin explained that he was working with Youngstown State University to help repair steam pipes under Elm Street and Rayen Avenue so the university’s boilers could serve as a backup. He also said the company is exploring other options such as a second boiler to provide adequate backup service.
An earlier attempt to connect with YSU failed because of leaks along a steam pipe under crosswalks on Rayen and Elm. Martin suspected the leaks were caused as a result of contractors puncturing the lines when the crosswalks were installed.
He has asked the city for some assistance in the matter, such as using municipal equipment from the water department to excavate streets and repair or replace the pipes.
“That’s really unfair to the city for you to make that reference that we’re in a partnership,” Brown told Martin. “We’re paying you as a customer.”
The exchange became heated between the mayor and Martin, as the mayor insisted that the city had no obligation to support a private utility.
Martin said the city is indeed a customer, but as a city, there are departments that can assist SOBE. The city, for example, could provide chiller services to the Wick Tower from a chiller atop 20 Federal Place, saving SOBE $14,500 per month.
“Reg, stop this!” Brown exclaimed. “You are not a partner, and you’re not going to use us as a scapegoat saying the city can help with this and the city can help with that. Tell them the truth, Reg.”
Martin said his plan is to form an advisory committee staffed with downtown customers that can help improve communications between the utility and its customers.
Councilman Julius Oliver, 1st Ward, said, ultimately, the state of Ohio has abdicated its responsibility on this system and has not provided adequate support. “The state has been kicking the can on this, but don’t let this guy try to put this on the city of Youngstown. We are a customer like everybody else trying to find a solution for this.”
Oliver promptly then left the meeting and was eventually followed by the mayor, Miasek and Fields.
Nevertheless, SOBE’s financial situation is precarious. The company is $4 million in debt, and there are approximately four customers who are past due. As it stands, the company brings in approximately $103,000 per month in revenue and is limited as to how much it can spend on new improvements and securing a second boiler as a backup.
Martin acknowledged that no one is forced to remain a customer, adding that they could install their own boiler system, which he noted would be costly. He explained that overall costs would be substantially lower if customers remain on the SOBE system.
“If I lose three to four customers – that leaves 24 customers — I’m shutting the place down,” Martin said. “There is no money at this time coming in to supplement and everyone loses.”
Martin was appointed as a receiver for the company in 2016 when it was then known as Youngstown Thermal LLC. Then, the company had six boilers, which could be used as a backup. Youngstown Thermal was sold to SOBE Thermal in 2019, the new owners removed the boilers with the intent to replace them with a system that operated on synthetic gas made from tire waste. In the meantime, SOBE was leasing a boiler from Wabash Power Co. until it could bring the new system online.
However, the city and residents pushed back on the concept of a system that generated heat through synthetic gas, citing environmental concerns.
Martin has now been brought back a second time to manage the district heating company’s affairs and is in the process of working to secure a backup for the system.
“We have a boiler right now that is working,” Martin said. “For the winter, I know I need to either have that line fixed or bring in a secondary boiler.”
The city, however, remains skeptical, noting this morning’s meeting did not inspire confidence in SOBE.
“We came into this meeting wanting to get a lot of clarification around planning for the long-term,” a spokesman for the city said. “I don’t think we got any of that today. That’s the concerning part – we’re walking out of here hearing an hour and-a-half of excuses and not a lot of answers.”
Pictured at top: Reg Martin, the receiver for SOBE Thermal Systems, speaks during Wednesday’s meeting.