Press Release

PUC Approves Scranton Steam Heat Co. Application to Abandon Service

Published on 8/17/2006

Filed under: Gas

HARRISBURG, Pa. – The Pennsylvania Public Utility Commission (PUC) today granted the application of Community Central Energy Corp. (CCEC) of Scranton to abandon service to its 26 steam heat customers.

The Commission voted unanimously to allow the company to abandon service based upon the company’s continued losses, burden of debt and poor operating performance. CCEC provides steam heat for industrial, commercial, institutional and governmental customers.

The PUC also found that abandonment was in the public interest after determining that the cost to produce steam heat would be prohibitive for the limited number of customers still remaining. The Commission’s reasons for allowing the abandonment include:

• Unaudited financial statements that indicated that the company lost money in 2003, 2004 and 2005 for a total loss of about $834,380;
• Unaudited balance sheets for 2003 and 2004 that showed an alarmingly low ratio between current assets and current liabilities; and
• The company has no margin of safety for meeting debt payment schedules in the event of possible losses in current assets or collectible accounts.

The Commission did place conditions upon the abandonment such as CCEC must continue to comply with the Public Utility Code and also must file a written status report with the PUC every 60 days. CCEC, its customers and all other parties also must resolve their financial matters such as payment of bills, judgments and liens before the company can de-certificate.

The company uses natural gas to generate steam for its heating customers. By law, CCEC is permitted to pass on to customers – dollar-for-dollar – the natural gas costs related to powering its steam generation facilities. Within the last year, the company was granted steam cost rate increases that have resulted in about a 124 percent rate increase for the customers who remain on the system. On Feb. 9, 2006, the Commission issued an emergency order that allowed CCEC to continue service after the loss of a contracted natural gas supplier due to its default on payment for supplies, which affected the company’s ability to ensure reliable service.

On May 16, 2006, the company filed to abandon service. A June 2006 report issued by the Commission confirmed that the company appeared to lack the ability to continue to provide safe, reliable service at reasonable rates. The report also found that most of the CCEC customers have conversion plans in place. Further analysis of the company’s lines of credit, revenues and expenses showed a large negative cash flow going into the summer season of system maintenance. Also, CCEC owed its gas suppliers more than $1 million. A large percentage of the company’s customers also had not paid their bills for 90 days or more, making it obvious the deficiencies could not be cured by a rate increase.

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 stewards of competition. For recent news releases, or more information about the PUC, visit our website at www.puc.state.pa.us.

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Docket No. A-130100F2000

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