EGR Commerce Energy Grp.,

COSTA MESA, Calif., March 15 /PRNewswire-FirstCall/ -- Commerce Energy Group, Inc. (AMEX:EGR), a leading U.S. electricity and natural gas marketing company, today announced results for its second quarter and six months ended January 31, 2006. Second Quarter of Fiscal 2006 Results The Company reported a net loss of $4.1 million, or $(0.13) per share, for the second quarter of fiscal 2006, compared with a net loss of $2.3 million, or $(0.08) per share, for the second quarter of fiscal 2005. Second quarter results of fiscal 2006 were negatively impacted by a number of factors related to the Company's natural gas business, including abnormal winter weather conditions that led to unexpectedly high variances between forecasted and actual natural gas usage of our customers; unprecedented height and volatility in natural gas prices; and inaccuracies in determining price exposure in the Company's natural gas portfolio resulting in a mark-to-market loss on forward natural gas supply purchases initially intended as cash flow hedges under SFAS 133. "The second quarter was a challenging one, including large weather variances in our customers' winter natural gas loads and unprecedented volatility in natural gas prices," said Steven S. Boss, chief executive officer. "And while volatile energy prices and market conditions were key factors in our disappointing second quarter results, these have favorably impacted our competitive position in our markets and improved our sales growth opportunities going forward. We believe that we have corrected the issues that combined to offset an otherwise encouraging quarter of progression in the Company's development." Net revenues for the second quarter of fiscal 2006 were $72.7 million, a 19% increase compared with $61.0 million for the second quarter of fiscal 2005. The higher net revenues reflect a $30.5 million increase from new markets, primarily natural gas, entered with the February 2005 acquisition of the ACN Energy assets and customers and were partly offset by a $14.7 million decrease in excess energy sales, including $9.3 million related to a sale in January 2005 of electricity forward supply contracts in Pennsylvania, and lower retail electricity sales in Michigan. Gross profit for the second quarter of fiscal 2006 totaled $3.8 million, a 55% decrease from $8.4 million in the second quarter of fiscal 2005. For the second quarter of fiscal 2006, gross profit was comprised of $5.1 million from electricity and a loss of $1.3 million from natural gas. Gross profit from electricity for the second quarter of fiscal 2006 declined $3.3 million from the comparable quarter of fiscal 2005, reflecting the impact of the gain on sale of the Pennsylvania electricity supply contracts of $7.2 million in the second quarter of fiscal 2005 and partly offset by higher variable electricity sales prices in the second quarter of fiscal 2006. The gross margin loss in natural gas includes a mark-to-market loss of $2.7 million on supply contracts entered in December 2005, which decreased in market value due to a significant decline in natural gas prices in January 2006. The decline in market value and related loss on these contracts required mark-to-market accounting treatment under SFAS 133. Selling and marketing expenses for the second quarter of fiscal 2006 increased $0.5 million from the comparable quarter of fiscal 2005, reflecting increased commission costs related to the ACN Energy assets. General and administrative expenses declined $3.2 million reflecting a $4.1 million decline in employment-related settlements and severance costs and lower payroll and legal expenses. These declines were partly offset by added direct costs of $1.6 million related to the acquired operations of the ACN Energy assets. Year-to-Date Results for the Six Months Ended January 31, 2006 The Company reported a net loss of $3.9 million, or $(0.13) per share, for the six months ended January 31, 2006, compared with a net loss of $2.4 million, or $(0.08) per share, for the six months ended January 31, 2005. Net revenues for the six months ended January 31, 2006, were $137.0 million, a 15% increase compared with $119.5 million for the six months ended January 31, 2005. The increase primarily reflects the addition of the natural gas and electric customers resulting from the Company's February 2005 acquisition of the ACN Energy assets partly offset by lower excess energy sales. Gross profit for the six months ended January 31, 2006 was $12.0 million, a 23% decrease from $15.6 million for the same period in fiscal 2005. The decrease was primarily due to the $7.2 million gain on the sale of the electricity supply contracts in Pennsylvania in January 2005 offset by higher electricity sale prices in California and Pennsylvania. Selling and marketing expenses for the six months ended January 31, 2006, increased slightly from the comparable period in fiscal 2005, reflecting increased commission costs, and partly offset by lower payroll expenses. General and administrative expenses for the six months ended January 31, 2006 were $14.5 million, a $0.6 million decrease from $15.1 million for the same period in 2005. The decrease reflects a reduction in employment-related settlements and severance costs and lower personnel costs, offset in part by added direct costs related to the acquired operations of the ACN Energy assets. Liquidity At January 31, 2006, the Company had unrestricted cash and cash equivalents of $13.4 million and no debt. The Company does not have open lines of credit for unsecured borrowings or letters of credit. Credit terms from energy suppliers often require the Company to post collateral against its energy purchases and against its credit exposure under forward supply contracts. Any such collateral obligations are funded with available cash. As of January 31, 2006, the Company had $10.5 million in restricted cash and cash equivalents to secure supplier letters of credit and $9.9 million in deposits principally pledged as collateral in connection with energy purchase agreements. About Commerce Energy Group, Inc. Commerce Energy Group, Inc. (AMEX:EGR) is a leading independent U.S. electricity and natural gas marketing company, operating through its wholly owned subsidiaries, Commerce Energy, Inc. and Skipping Stone Inc. Commerce Energy, Inc. is a FERC-licensed unregulated retail marketer of natural gas and electricity to homeowners, commercial and industrial consumers and institutional customers operating in nine states. Skipping Stone is an energy consulting firm serving utilities, pipelines, merchant trading and technology companies. For more information, visit http://www.commerceenergygroup.com/ . Forward-Looking Statements Except for historical information contained in this release, statements in this release, including those of Mr. Boss, may constitute forward-looking statements regarding the company's assumptions, projections, expectations, targets, intentions or beliefs about future events. Words or phrases such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "targets," "will likely result," "will continue," "may," "could" or similar expressions identify forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Commerce Energy Group, Inc. cautions that while such statements are made in good faith and the company believes such statements are based upon reasonable assumptions, including without limitation, management's examination of historical operating trends, data contained in records, and other data available from third parties, the company cannot assure that its projections will be achieved. In addition to other factors and matters discussed from time to time in our filings with the U.S. Securities and Exchange Commission, or the SEC, some important factors that could cause actual results or outcomes for Commerce Energy Group, Inc. or its subsidiaries to differ materially from those discussed in forward-looking statements include: the volatility of the energy market, competition, operating hazards, uninsured risks, failure of performance by suppliers and transmitters, changes in general economic conditions, seasonal weather or force majeure events that adversely effect electricity or natural gas supply or infrastructure, decisions by our energy suppliers requiring us to post additional collateral for our energy purchases, increased or unexpected competition, adverse state or federal legislation or regulation or adverse determinations by regulators, including failure to obtain regulatory approvals. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, Commerce Energy Group, Inc. undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all such factors. Commerce Energy Group, Inc. Consolidated Statements of Operations (in thousands, except per share data) Three Months Ended Six Months Ended January 31, January 31, 2006 2005 2006 2005 Net revenue $72,654 $61,048 $137,022 $119,545 Direct energy costs 68,892 52,639 125,020 103,975 Gross profit 3,762 8,409 12,002 15,570 Selling and marketing expenses 1,228 761 1,926 1,715 General and administrative expenses 6,847 10,043 14,456 15,050 Loss from operations (4,313) (2,395) (4,380) (1,195) Other income and expenses: Initial formation litigation expenses -- (162) -- (1,601) Interest income, net 201 215 488 406 Net Loss $(4,112) $(2,342) $(3,892) $(2,390) Loss per common share - Basic $(0.13) $(0.08) $(0.13) $(0.08) Loss per common share - Diluted $(0.13) $(0.08) $(0.13) $(0.08) Weighted-average shares outstanding: Basic 30,464 30,534 30,881 30,528 Diluted 30,464 30,534 30,881 30,528 Volume and Customer Count Data Three Months Ended Six Months Ended January 31, January 31, 2006 2005 2006 2005 Electric - Thousand kilowatt- hour (kWh) 421,000 681,000 972,000 1,456,000 Natural Gas - Dekatherms (Dth) 2,093,000 -- 2,808,000 -- Customer Count 128,000 94,000 128,000 94,000 Condensed Consolidated Balance Sheets (in thousands) January 31, 2006 July 31, 2005 Assets Cash and cash equivalents $13,380 $33,344 Accounts receivable, net 38,111 27,843 Inventory 4,079 4,561 Other current assets 8,394 3,542 Total current assets 63,964 69,290 Restricted cash and cash equivalents 10,479 8,222 Deposits 9,939 11,347 Property and equipment, net 2,857 2,007 Goodwill, intangible and other assets 11,240 11,766 Total assets $98,479 $102,632 Liabilities and stockholders' equity Accounts payable $23,230 $25,625 Accrued liabilities 11,966 6,946 Total current liabilities 35,196 32,571 Total stockholders' equity 63,283 70,061 Total liabilities and stockholders' equity $98,479 $102,632 DATASOURCE: Commerce Energy Group, Inc. CONTACT: Investor Relations, Commerce Energy Group, Inc., +1-800-962-4655, ; or Cecilia Wilkinson, , or Wade Huckabee, , both of PondelWilkinson Inc., +1-310-279-5980, for Commerce Energy Group, Inc. Web site: http://www.commerceenergy.com/

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