Press Release

PUC: Scranton Steam Heat Co. Lacks Ability to Continue Service at Reasonable Rates

Published on 6/1/2006

Filed under: Gas

HARRISBURG – Community Central Energy Corp. appears to lack the ability to continue to provide safe, reliable service at reasonable rates, according to a Public Utility Commission (PUC) audit report released today.

“Based upon the continuous and growing losses experienced by the company, the burden of current debt and our awareness of factors contributing to this poor operating performance, we can only characterize the company’s financial condition as extremely precarious,” according to the report.

The Commission launched an investigation into the viability of the Scranton company on Feb. 9, 2006, after the loss of a contracted natural gas supplier affected the company’s ability to ensure reliable service. The report’s conclusions are based on:

• The company’s overall financial condition;
• The company’s overall financial planning and practices;
• Our analysis of the company’s cash flows;
• The amounts owed to the company by steam heat customers;
• The amounts owed by the company to trade vendors and gas suppliers;
• The company’s operating constraints; and
• Responses to our customer survey.

According to the report, the company experienced net losses in 2003, 2004 and 2005. For 2003 and 2004, the Commission also found an “alarmingly low ratio” between the company’s current assets and current liabilities.

A PUC survey of the company’s customers also showed that most customers are in the process of converting to another heating source as a result of the high cost of steam heat. The survey results indicated that the company will not be able to survive much beyond the 2005-2006 heating season due to the loss of its customer base.

During months of operation, Community Central must produce enough steam heat to maintain a constant minimum pressure and temperature throughout the system. The same amount of fuel is necessary to maintain the system pressures regardless of whether or not the company’s customers are consuming steam.

Community Central Energy provides heat for about 27 industrial, commercial, institutional and residential entities. The company uses natural gas to generate steam for its heating customers. Effective March 1, 2006, the company increased its steam cost rate by $38.13 per MLB from $56.01 to $94.14 per MLB or 68.1 percent. By law, Community Central Energy is permitted to pass on to customers natural gas costs related to powering the steam generation plant. It is a dollar-for-dollar pass through of costs.

The Pennsylvania Public Utility Commission ensures safe, reliable and reasonably priced electric, natural gas, water, telephone and transportation service for Pennsylvania consumers, by regulating public utilities and by serving as responsible stewards of competition. For recent news releases, or more information about the PUC, visit our website at www.puc.state.pa.us.

# # #

Docket No. M-00061936

Contact:

• Press Secretary
  717-787-5722