Costa Mesa-based Commerce Energy Group Inc. is used to upheaval. Sure enough, it’s endured another round of challenges in the past few months.
The energy reseller has announced an earnings restatement, seen its stock struggle and lost a few board members.
And the company last month brought in a new chief executive, Steven Boss, to replace an interim leader, Peter Weigand, who was let go.
The change at the top came after a previous shakeup. Last fall Weigand took the helm of the company when Commerce Energy put Ian Carter, its former chief executive, on administrative leave.
Earlier this year, the company said it agreed to pay Carter $3 million and some health insurance costs in a settlement.
Boss, who became a director of the company in July, is looking ahead. He wants to get the company on stronger financial footing, target key markets and become leaner.
“Hopefully, the market is going to understand that this is a company that’s had some problems in the past but that these problems are getting behind us,” Boss said.
Commerce Energy is a retail marketer of electricity and natural gas. It sells to homeowners, as well as commercial, industrial and institutional customers.
The company depends on regulators and legislators to force established utilities to sell power to the company,and other resellers,at lower prices. Then, it can resell the power to consumers and businesses for a profit.
It lost many customers in the fallout from the California energy crisis earlier this decade. Regulators in 2001 created so-called “no switch” rules to stabilize the market. That meant Commerce Energy and other alternative energy suppliers could sell electricity only to those who already had switched from their utility to a retailer.
Although the company continues to keep an eye on Sacramento legislators and other state governments, it’s recently been contending with other issues.
In June the energy reseller said it would restate its earnings for the quarter ended Jan. 31. Commerce Energy said it underestimated costs associated with transferring customers to a new provider.
The restatement came after it took longer than expected to back out of the Philadelphia region that became too expensive for independent resellers to make a profit in, the company said.
The departure shrunk its profit in the quarter ended Jan. 31 by 23%. In connection with the restatement, the company said it had “weakness in its internal controls.”
Last month Commerce Energy terminated “without cause” Richard Boughrum, the firm’s chief financial officer.
Commerce Energy is installing new software to improve internal accounting controls and promises to be compliant with the Sarbanes-Oxley Act by the middle of next summer,its deadline for compliance.
The company’s board of directors also has seen some changes. In July, the company said it was losing board members Gregory Craig and Mark Pocino. Neither left because of any disagreements with the company, Commerce Energy said.
Boss initially was named as one replacement. Two weeks ago, Commerce Energy named Gary J. Hessenauer as a director. Hessenauer is a former executive with Sempra Energy Solutions and Edison International, among others.
The addition of independent director Hessenauer to the board makes Commerce Energy compliant with the American Stock Exchange’s rule governing board independence.
Investors have been wary of the stock amid all the financial and executive moves.
After rising above $3 a share in February, the stock fell and hovered at about $1.50. But in the past few weeks, the lightly traded stock has climbed to $1.70, giving it a market value of about $54 million.
Targeting ‘Friendlier’ Markets
Boss said the company will shift its focus to fewer markets where the regulatory environments are friendlier, including the electricity market in Texas and natural gas markets in California and Georgia.
The biggest opportunity is with small- and midsize businesses, which he sees as an underserved market. Commerce Energy will beef up its sales and marketing efforts to go after customers, he said.
“We’ll continue to add residential customers in our markets, but most of our corporate resources are going to be devoted to that small- and medium-sized business,” Boss said.
To help cut costs, the company, which employs about 200 people, has laid off four workers, including three in Costa Mesa where about 75 people work.
In the quarter ended April 30 the company’s revenue jumped 41% to $68.5 million, compared to a year earlier.
The company credited the sales increase to its acquisition of Farmington Hills, Mich.-based ACN Energy.
Commerce Energy’s net loss narrowed to $900,000, from $5.6 million a year earlier.
