EGR Commerce Energy Grp.,

COSTA MESA, Calif., June 13 /PRNewswire-FirstCall/ -- Commerce Energy Group, Inc. (AMEX:EGR), a leading U.S. electricity and natural gas marketing company, today announced results for its third quarter and nine months ended April 30, 2006. Third Quarter Fiscal 2006 Results The Company reported net income of $1.0 million, or $0.03 per share, for the third quarter of fiscal 2006, compared with a net loss of $1.3 million, or $0.04 per share, for the third quarter of fiscal 2005. Third quarter results of fiscal 2006 reflect the benefits of higher gross profit and significantly lower general and administrative expenses, items that more than offset the impact of higher sales and marketing expenses related to the Company's increased customer acquisition initiatives. "The third quarter was a solid period of financial performance for Commerce Energy," said Steven S. Boss, chief executive officer. "Our higher gross profits and reduced operating expenses in the third quarter compared with the third quarter of last year demonstrate the impact of our efforts toward our goal of immediate and sustainable growth. We are pleased to rebound from a disappointing second quarter with this strong quarter of performance. Additionally, and more importantly, we are excited by the recent success that our customer acquisition efforts are having in our targeted growth markets." Net revenues for the third quarter of fiscal 2006 were $57.8 million, a $10.7 million decrease from the third quarter of fiscal 2005, driven primarily by the impact of a $9.0 million decrease in retail electricity sales in Pennsylvania and Michigan, and a decrease of $5.6 million in wholesale excess electricity sales. These decreases were partially offset by higher retail electricity sales in California and Texas and higher natural gas sales revenues. Gross profit for the third quarter of fiscal 2006 totaled $8.1 million, a 5% increase from $7.7 million in the third quarter of fiscal 2005. For the third quarter of fiscal 2006, gross profit was comprised of $3.7 million from electricity and $4.4 million from natural gas. Gross profit from electricity for the third quarter of fiscal 2006 declined $1.0 million from the comparable quarter of fiscal 2005, reflecting lower retail sales volumes partly offset by higher variable sales prices during the third quarter of fiscal 2006. Gross profit for natural gas increased $1.4 million, a 47% increase from the third quarter of fiscal 2005 due largely to higher gross profit margins on variable priced sales contracts. Selling and marketing expenses for the three months ended April 30, 2006, increased $0.2 million, or 13%, from the comparable three months last year, reflecting higher telemarketing, advertising and direct mail costs related to the Company's increased customer acquisition initiatives partly offset by lower commission expenses. Sales commission expenses declined $0.4 million due primarily to ACN's cancellation of the Sales Agency Agreement with the Company effective February 9, 2006. General and administrative expenses decreased $2.1 million, or 26%, from the comparable quarter of fiscal 2005, reflecting lower bad debt and legal expenses and other corporate costs. Year-to-Date Results for the Nine Months Ended April 30, 2006 The Company reported a net loss of $2.9 million, or $0.09 per share, for the nine months ended April 30, 2006, compared with a net loss of $3.7 million, or $0.12 per share, for the nine months ended April 30, 2005. Net revenues for the nine months ended April 30, 2006, were $194.8 million, a 4% increase from the comparable prior-year period. The increase in net revenues was primarily attributable to the February 2005 addition of the ACN Energy Assets, partly offset by lower sales volumes in the Company's traditional electricity markets in Pennsylvania and Michigan and lower excess electricity sales. Excess electricity sales for the nine months ended April 30, 2006, decreased to $7.0 million compared to $27.7 million for the comparable period in 2005. This decrease reflects the impact of a sale in January 2005 of $9.3 million of electricity supply contracts in Pennsylvania and lower sales of electricity in California and Pennsylvania in the wholesale supply markets. Gross profit for the nine months ended April 30, 2006, was $20.1 million, a 14% decrease from $23.3 million for the same period in fiscal 2005. The decrease primarily reflects the impact of a $7.2 million gain in January 2005 from the sale of the electricity supply contracts in Pennsylvania, partly offset by higher gross profit for the nine months ended April 30, 2006, in California and Pennsylvania resulting from higher electricity sales prices. Selling and marketing expenses for the nine months ended April 30, 2006, were $0.4 million higher than the comparable nine months ended April 30, 2005, due to increased customer acquisition expenses, partly offset by lower salary expenses. General and administrative expenses for the nine months ended April 30, 2006, decreased $2.7 million from the nine months ended April 30, 2005, reflecting a decrease of $4.1 million in employment-related settlements and severance costs and lower bad debt and corporate expenses, offset in part by added direct costs related to the acquired operations of the ACN Energy Assets. Liquidity At April 30, 2006, the Company had unrestricted cash and cash equivalents of $22.8 million and no debt. 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. Historically, any such collateral obligations were funded with available cash and as of April 30, 2006, the Company had $12.9 million in restricted cash and cash equivalents to secure supplier letters of credit and $7.4 million in deposits principally pledged as collateral in connection with utility operating requirements. On June 8, 2006, the Company entered into a three-year credit facility with Wachovia Capital Finance Corporation. The facility provides up to $50 million for the issuance of letters of credit and for revolving working capital loans, subject to the limits of a defined borrowing base. 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/. Contacts: Commerce Energy Group, Inc. PondelWilkinson Inc. Linda Ames Cecilia Wilkinson/Wade Huckabee Corporate Communications 310-279-5980 (800) 962-4655 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 Nine Months Ended April 30, April 30, 2006 2005 2006 2005 Net revenues $57,755 $68,478 $194,777 $188,022 Direct energy costs 49,643 60,767 174,664 164,741 Gross profit 8,112 7,711 20,113 23,281 Selling and marketing expenses 1,420 1,258 3,346 2,986 General and administrative expenses 5,911 7,993 20,367 23,029 Income (loss) from operations 781 (1,540) (3,600) (2,734) Other income and expenses: Initial formation litigation expenses -- -- -- (1,601) Interest income, net 221 221 710 626 Net Income (loss) $1,002 $(1,319) $(2,890) $(3,709) Income (loss) per common share - Basic $0.03 $(0.04) $(0.09) $(0.12) Income (loss) per common share - Diluted $0.03 $(0.04) $(0.09) $(0.12) Weighted-average shares outstanding: Basic 30,186 31,199 30,659 30,799 Diluted 30,328 31,199 30,659 30,799 Volume and Customer Count Data Three Months Ended Nine Months Ended April 30, April 30, 2006 2005 2006 2005 Electric - Thousand kilowatt-hour (kWh) 372,000 621,000 1,344,000 2,077,000 Natural Gas - Dekatherms (Dth) 1,646,000 1,826,000 4,485,000 1,826,000 Customer Count 125,000 150,000 128,000 150,000 Condensed Consolidated Balance Sheets (in thousands) April 30, July 31, 2006 2005 Assets Cash and cash equivalents $22,761 $33,344 Accounts receivable, net 26,113 27,843 Inventory 1,131 4,561 Other current assets 3,004 3,542 Total current assets 53,009 69,290 Restricted cash and cash equivalents 12,901 8,222 Deposits 7,448 11,347 Property and equipment, net 3,610 2,007 Goodwill, intangible and other assets 8,959 11,766 Total assets $85,927 $102,632 Liabilities and stockholders' equity Accounts payable $15,484 $25,625 Accrued liabilities 7,332 6,946 Total current liabilities 22,816 32,571 Total stockholders' equity 63,111 70,061 Total liabilities and stockholders' equity $85,927 $102,632 DATASOURCE: Commerce Energy Group, Inc. CONTACT: Linda Ames, Corporate Communications of 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.commerceenergygroup.com/

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