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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2006
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                    to
 Commission File Number 001-32239
 COMMERCE ENERGY GROUP, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware(State or other jurisdiction of
incorporation or organization)
    
    20-0501090(I.R.S. Employer
Identification No.)600 Anton Boulevard, Suite 2000,
Costa Mesa, California(Address of principal executive offices)
    
    92626(Zip Code)
 (714) 259-2500
 (Registrants telephone number, including area code)
 Not Applicable
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  Large Accelerated Filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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##### 



COMMERCE ENERGY GROUP, INC.
 Form 10-Q
For the Period Ended April 30, 2006
Index
 PagePart I  Financial Information
    
    
    2Item 1. Financial Statements:
    
    
    2Condensed Consolidated Statements of Operations for the three and nine
months ended April 30, 2006 and April 30, 2005
    
    
    2Condensed Consolidated Balance Sheets as of April 30, 2006 and July 31, 2005
    
    
    3Condensed Consolidated Statements of Cash Flows for the nine months ended
April 30, 2006 and April 30, 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    34Part II  Other Information
    
    
    35Item 1. Legal Proceedings
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 5 Other Information
    
    
    37Item 6. Exhibits
    
    
    38Signatures
    
    
    41EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2EXHIBIT 99.1
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FORWARD-LOOKING INFORMATION
    
    
    regulatory changes in the states in which we operate that could adversely affect our operations;
    
    our continued ability to obtain and maintain licenses from the states in which we operate;
    
    changes in the restructuring of retail markets which could prevent us from selling
electricity and natural gas on a competitive basis;
    
    our dependence upon a limited number of third-party suppliers of electricity and natural
gas;
    
    our dependence upon a limited number of local electric and natural gas utilities to
transmit and distribute the energy we sell to our customers, and to accurately meter and
bill for the energy we supply our customers;
    
    fluctuations in market prices for electricity and natural gas;
    
    our ability to accurately forecast the expected energy needs of our electricity and natural gas customers;
    
    decisions by electricity and natural gas utilities not to raise their rates to reflect
higher market cost of electricity and natural gas, thereby adversely affecting our
competitiveness;
    
    our ability to successfully compete in new electricity and natural gas markets that we
enter;
    
    decisions by our energy suppliers to require us to post additional collateral to support
our energy purchases;
    
    our ability to obtain and retain credit necessary to support both current operations and future growth;
    
    our ability to successfully integrate businesses we may acquire;
    
    seasonal weather or force majeure events that adversely impact electricity and natural
gas supply and infrastructure and which could prevent us from competitively servicing the
demand requirements of our customers; and
    
    our dependence upon independent system operators, regional transmission organizations,
natural gas transmission companies, and local distribution companies to properly coordinate
and manage their transmission grids and distribution networks, and to accurately and timely
calculate and allocate the cost of services to market participants.
  1




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 COMMERCE ENERGY GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedApril 30,
    
    
    April 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net revenue
    
    $
    57,755
    
    
    $
    68,478
    
    
    $
    194,777
    
    
    $
    188,022Direct energy costs
    
    
    49,643
    
    
    
    60,767
    
    
    
    174,664
    
    
    
    164,741Gross profit
    
    
    8,112
    
    
    
    7,711
    
    
    
    20,113
    
    
    
    23,281Selling and marketing expenses
    
    
    1,420
    
    
    
    1,258
    
    
    
    3,346
    
    
    
    2,986General and administrative expenses
    
    
    5,911
    
    
    
    7,993
    
    
    
    20,367
    
    
    
    23,029Income (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
    
    
    
    626Total other income and expenses
    
    
    221
    
    
    
    221
    
    
    
    710
    
    
    
    (975
    )Net income (loss)
    
    $
    1,002
    
    
    $
    (1,319
    )
    
    $
    (2,890
    )
    
    $
    (3,709
    )Income (loss) per common share:Basic and diluted
    
    $
    0.03
    
    
    $
    (0.04
    )
    
    $
    (0.09
    )
    
    $
    (0.12
    )
  2




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COMMERCE ENERGY GROUP, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 April 30, 2006
    
    
    July 31, 2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    22,761
    
    
    $
    33,344Accounts receivable, net
    
    
    26,113
    
    
    
    27,843Inventory
    
    
    1,131
    
    
    
    4,561Prepaid expenses and other current assets
    
    
    3,004
    
    
    
    3,542Total current assets
    
    
    53,009
    
    
    
    69,290Restricted cash and cash equivalents
    
    
    12,901
    
    
    
    8,222Deposits
    
    
    7,448
    
    
    
    11,347Property and equipment, net
    
    
    3,610
    
    
    
    2,007Goodwill
    
    
    4,801
    
    
    
    6,801Other intangible assets
    
    
    4,158
    
    
    
    4,965Total assets
    
    $
    85,927
    
    
    $
    102,632LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    15,484
    
    
    $
    25,625Accrued liabilities
    
    
    7,332
    
    
    
    6,946Total current liabilities
    
    
    22,816
    
    
    
    32,571Commitments and contingencies [Note 6]Stockholders equity:Common stock  150,000 shares authorized with
$0.001 par value; 31,436 shares issued and
outstanding at July 31, 2005 and 29,558
(unaudited) at April 30, 2006
    
    
    59,146
    
    
    
    62,609Unearned share-based compensation
    
    
    (429
    )
    
    
    Other comprehensive loss
    
    
    (168
    )
    
    
    Retained earnings
    
    
    4,562
    
    
    
    7,452Total stockholders equity
    
    
    63,111
    
    
    
    70,061Total liabilities and stockholders equity
    
    $
    85,927
    
    
    $
    102,632
  3




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COMMERCE ENERGY GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months EndedApril 30,2006
    
    
    2005Cash Flows From Operating ActivitiesNet loss
    
    $
    (2,890
    )
    
    $
    (3,709
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    801
    
    
    
    1,001Amortization
    
    
    835
    
    
    
    804Provision for doubtful accounts
    
    
    1,940
    
    
    
    2,502Impairment of Summit investments
    
    
    
    
    
    
    5Stock-based compensation expense
    
    
    407
    
    
    
    72Deferred income tax provision
    
    
    
    
    
    
    74Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (210
    )
    
    
    1,209Inventory
    
    
    3,430
    
    
    
    (1,527
    )Prepaid expenses and other assets
    
    
    4,407
    
    
    
    5,926Accounts payable
    
    
    (10,140
    )
    
    
    (10,958
    )Accrued liabilities and other
    
    
    218
    
    
    
    3,914Net cash used in operating activities
    
    
    (1,202
    )
    
    
    (687
    )Cash Flows From Investing ActivitiesPurchase of property and equipment
    
    
    (2,403
    )
    
    
    (670
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (14,525
    )Net cash used in investing activities
    
    
    (2,403
    )
    
    
    (15,195
    )Cash Flows From Financing ActivitiesProceeds from exercise of stock options
    
    
    11
    
    
    
    50Repurchase of stock
    
    
    (2,310
    )
    
    
    (252
    )Sale of common stock
    
    
    
    
    
    
    10Increase in restricted cash and cash equivalents
    
    
    (4,679
    )
    
    
    (1,899
    )Net cash used in financing activities
    
    
    (6,978
    )
    
    
    (2,091
    )Decrease in cash and cash equivalents
    
    
    (10,583
    )
    
    
    (17,973
    )Cash and cash equivalents at beginning of period
    
    
    33,344
    
    
    
    54,065Cash and cash equivalents at end of period
    
    $
    22,761
    
    
    $
    36,092
  4




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COMMERCE ENERGY GROUP, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 1. Summary of Significant Accounting Policies
 Basis of Presentation
  Preparation of Interim Condensed Consolidated Financial Statements
  Uses of Estimates
  Reclassifications
  
 5




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
 Revenue Recognition
  Three Months Ended
    
    
    Nine Months EndedApril 30,
    
    
    April 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Retail electricity sales
    
    $
    37,726
    
    
    $
    44,754
    
    
    $
    132,168
    
    
    $
    142,251Excess electricity sales
    
    
    74
    
    
    
    5,695
    
    
    
    6,963
    
    
    
    27,742Total electricity sales
    
    
    37,800
    
    
    
    50,449
    
    
    
    139,131
    
    
    
    169,993Retail natural gas sales
    
    
    19,955
    
    
    
    18,029
    
    
    
    55,646
    
    
    
    18,029Net revenue
    
    $
    57,755
    
    
    $
    68,478
    
    
    $
    194,777
    
    
    $
    188,022
   Stock-Based Compensation
 Share-Based Payments Accounting for Stock-Based Compensation Accounting for
Stock Issued to Employees.
  Nine Months EndedApril 30,2006
    
    2005Weighted-average risk-free interest rate
    
    
    4.95
    %
    
    
    4.0
    %Average expected life in years
    
    
    5.12
    
    
    
    6.0Expected dividends
    
    None
    
    NoneExpected volatility
    
    
    0.7731
    
    
    
    
 6




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
  Options OutstandingWeightedNumber of
    
    
    
    
    
    
    AverageShares (in
    
    
    Exercise Price
    
    
    ExerciseThousands)
    
    
    Per Share
    
    
    PriceBalance at January 31, 2006
    
    
    8,022
    
    
    $
    0.05-$3.75
    
    
    $
    2.27Options cancelled
    
    
    (157
    )
    
    $
    1.80
    
    
    $
    1.80Options exercised
    
    
    (221
    )
    
    $
    0.05
    
    
    $
    0.05Balance at April 30, 2006 (1)
    
    
    7,644
    
    
    $
    1.00-$3.75
    
    
    $
    2.37
 
 (1)
    
    Options exercisable as of April 30, 2006 were 7,299 with a weighted average exercise price of
$2.37.   Accounting for Stock Issued to
Employees Accounting for Stock-Based Compensation,
 Amended and Restated 2005 Employee Stock Purchase Plan
  2006 Stock Incentive Plan
  7




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
  Income Tax
  Other Comprehensive Income (Loss)
  Segment Reporting
  Accounts Receivable, Net
  April 30,
    
    
    July 31,2006
    
    
    2005Billed
    
    $
    20,376
    
    
    $
    22,017Unbilled
    
    
    9,862
    
    
    
    11,324$
    30,238
    
    
    $
    33,341Less allowance for doubtful accounts
    
    
    (4,125
    )
    
    
    (5,498
    )Accounts receivable, net
    
    $
    26,113
    
    
    $
    27,843
 Inventory
  8




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
 Recent Accounting Pronouncements
 Accounting Changes and Error Corrections, a replacement of APBO 20 and FASB
Statement No. 3 (SFAS 154
 Accounting for Derivative Instruments and Hedging Activities, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 2. Basic and Diluted Income (Loss) per Common Share
   Three Months Ended
    
    
    Nine Months EndedApril 30,
    
    
    April 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Net income (loss)
    
    $
    1,002
    
    
    $
    (1,319
    )
    
    $
    (2,890
    )
    
    $
    (3,709
    )Net income (loss)
applicable to
common stock
basic and diluted
    
    $
    1,002
    
    
    $
    (1,319
    )
    
    $
    (2,890
    )
    
    $
    (3,709
    )
 Three Months Ended
    
    
    Nine Months EndedApril 30,
    
    
    April 30,(in thousands)
    
    
    (in thousands)2006
    
    
    2005
    
    
    2006
    
    
    2005Denominator:Weighted-average
outstanding common
shares  basic
    
    
    30,186
    
    
    
    31,199
    
    
    
    30,659
    
    
    
    30,799Effect of stock options
    
    
    142
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average
outstanding common
shares  diluted
    
    
    30,328
    
    
    
    31,199
    
    
    
    30,659
    
    
    
    30,799
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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
  3. Market and Regulatory
  Electricity
     10




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
      Natural Gas
  4. Investments
   11




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
  5. Acquisitions
    6. Contingencies
 Litigation
   12




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
   13




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
 7. Derivative Financial Instruments
      April 30,
    
    
    July 31,2006
    
    
    2005Current assets
    
    $
    150
    
    
    $
    Current liabilities
    
    
    (1,342
    )
    
    
    Deferred gains
    
    
    1,024
    
    
    
    Other comprehensive loss
    
    $
    (168
    )
    
    $
    
  14




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COMMERCE ENERGY GROUP, INC.
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
  8. Settlement Agreements with Former Officers
    9. Subsequent Events
 Secured Borrowing Facility
   Office Closure and Transition
  15




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
      Acquisitions
 ACN Energy Transaction
  16




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Investments
   Market and Regulatory
  Electricity
    17




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Natural Gas
  18




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Critical Accounting Policies and Estimates
  
    
    Accounting for Derivative Instruments and Hedging Activities We purchase
substantially all of our power and natural gas under forward physical delivery contracts
for supply to our retail customers. These forward physical delivery contracts are defined
as commodity derivative contracts under Statement of Financial Accounting Standard, or SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. Using the
exemption available for qualifying contracts under SFAS No. 133, we apply the normal
purchase and normal sale accounting treatment to a majority of our forward physical
delivery contracts. Accordingly, we record revenue generated from customer sales as energy
is delivered to our retail customers and the related energy cost is recorded as direct
energy costs concurrently.As a result of a sale on January 28, 2005 of two significant electricity forward physical
delivery contracts (on a net cash settlement basis) back to the original supplier, the normal
purchase and normal sale exemption was determined to not be available in our Pennsylvania
market, or the PJM-ISO. Accordingly, we designate forward
physical delivery contracts entered into for the PJM-ISO, and certain other forward fixed
price purchases and financial derivatives as cash flow hedges, whereby mark-to-market
accounting gains or losses are deferred and reported as a component of Other comprehensive
income (loss) until the time of physical delivery and the fair value of the contracts is
recorded as a current or long-term derivative asset or liability. Subsequent changes in the
fair value of the derivative assets and liabilities are recorded on a net basis in Other
comprehensive income (loss) and subsequently reclassified to direct energy cost in our
consolidated Statement of Operations as the power is delivered. To the extent that the hedges
are not effective, the ineffective portion of the changes in fair market value is recorded
currently in direct energy costs. We intend to continue to use financial derivative
instruments (such as swaps, options and futures) as an effective way of assisting in managing
our price risk in energy supply procurement. Additionally, we utilize cash flow hedge
accounting, where appropriate. We anticipated the normal purchase and normal sale exception
will again be available to us starting in fiscal 2007.We also utilize other financial derivatives, primarily swaps, options and futures to hedge
our commodity price risks. Certain derivative instruments, which are designated as economic
hedges or as speculative, do not qualify for hedge accounting treatment and require current
period mark-to-market accounting in accordance with SFAS No. 133, with fair market value
being used to determine the related income or expense that is recorded each quarter in the
statement of operations. As a result, the changes in fair value of derivatives that do not
meet the requirements of normal purchase and normal sales accounting treatment or cash flow
hedge accounting are recorded in operating income (loss) and as a current or long-term
derivative asset or liability. The subsequent changes in the fair value of these contracts
could result in operating income (loss) volatility as the fair value of the changes are
recorded on a net basis in direct energy costs in our consolidated statement of operations
for each period.
    
    Independent System Operator Costs Included in direct energy costs, along with
electricity that we purchase, are scheduling coordination costs, certain real-time net
power purchase and sale cost, and other ISO fees and charges. The actual ISO costs are not
finalized until a settlement process by the ISO is performed for each days activities for
all grid participants. Prior to the completion of settlement (which
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may take from one to several months), we estimate these costs based on historical trends and
preliminary settlement information. The historical trends and preliminary information may
differ from actual costs resulting in the need to adjust the previous estimates.
    
    Transportation and Delivery Costs Included in direct energy costs, along with natural
gas that we purchase, are interstate pipeline costs and various non-by-passable utility
service charges. These fees are recognized in the month incurred and settled in the
following months.
    
    Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts based
on estimated losses resulting from non-payment of customer billings. If the financial
condition of our customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.
    
    Unbilled Receivables Our customers are billed monthly on a cycle basis as their
meters are read. Unbilled receivables represent the amount of electricity and natural gas
delivered to customers through the end of each calendar month, but not yet billed. Unbilled
receivables from sales are estimated by us to be the number of kilowatt-hours or dekatherms
delivered, but not yet billed, multiplied by the current average sales price per
kilowatt-hour or dekatherms as applicable.
    
    Inventory Inventory represents natural gas in storage as required by state regulatory
bodies and contractual obligations under customer choice programs. Inventory is stated at
the lower of average cost or market.
    
    Legal Matters From time to time, we may be involved in litigation matters. We regularly
evaluate our exposure to threatened or pending litigation and other business contingencies
and accrue for estimated losses on such matters in accordance with SFAS No. 5, Accounting
for Contingencies. As additional information about current or future litigation or other
contingencies becomes available, management assesses whether such information warrants the
recording of additional expense. Such additional expense could potentially have a material
adverse impact on our results of operations and financial position. See Factors That May
Affect Future Results  Our results of operations and financial condition could be affected
by pending and future litigation.
 Results of Operations
  20




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Three Months Ended April 30, 2006 Compared to Three Months Ended April 30, 2005
  Three Months Ended April 30,2006
    
    
    2005Dollars
    
    
    % Revenue
    
    
    Dollars
    
    
    % RevenueRetail electricity sales
    
    $
    37,273
    
    
    
    65
    %
    
    $
    44,334
    
    
    
    65
    %Natural gas sales
    
    
    19,955
    
    
    
    35
    %
    
    
    18,029
    
    
    
    26
    %Excess electricity sales
    
    
    74
    
    
    
    
    
    
    
    5,695
    
    
    
    8
    %Other
    
    
    453
    
    
    
    
    
    
    
    420
    
    
    
    1
    %Net revenue
    
    
    57,755
    
    
    
    100
    %
    
    
    68,478
    
    
    
    100
    %Direct energy costs
    
    
    49,643
    
    
    
    86
    %
    
    
    60,767
    
    
    
    89
    %Gross profit
    
    
    8,112
    
    
    
    14
    %
    
    
    7,711
    
    
    
    11
    %Selling and marketing expenses
    
    
    1,420
    
    
    
    2
    %
    
    
    1,258
    
    
    
    2
    %General and administrative expenses
    
    
    5,911
    
    
    
    10
    %
    
    
    7,993
    
    
    
    11
    %Income (loss) from operations
    
    $
    781
    
    
    
    2
    %
    
    $
    (1,540
    )
    
    
    (2
    %)
   21




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Net revenue
  Three Months Ended April 30,2006
    
    
    2005Dollars
    
    
    % Revenue
    
    
    Dollars
    
    
    % RevenueRetail Electricity Sales:California
    
    $
    14,963
    
    
    
    26
    %
    
    $
    13,710
    
    
    
    21
    %Pennsylvania/New Jersey
    
    
    14,748
    
    
    
    26
    %
    
    
    20,032
    
    
    
    29
    %Michigan
    
    
    3,458
    
    
    
    6
    %
    
    
    7,125
    
    
    
    10
    %All Other States, principally Texas
    
    
    4,104
    
    
    
    7
    %
    
    
    3,467
    
    
    
    5
    %Total Retail Electricity Sales
    
    
    37,273
    
    
    
    65
    %
    
    
    44,334
    
    
    
    65
    %Natural Gas Sales:California
    
    
    6,366
    
    
    
    11
    %
    
    
    4,379
    
    
    
    6
    %Ohio
    
    
    9,006
    
    
    
    16
    %
    
    
    8,582
    
    
    
    13
    %Georgia
    
    
    2,711
    
    
    
    5
    %
    
    
    2,989
    
    
    
    4
    %All Other States
    
    
    1,872
    
    
    
    3
    %
    
    
    2,079
    
    
    
    3
    %Total Natural Gas Sales
    
    
    19,955
    
    
    
    35
    %
    
    
    18,029
    
    
    
    26
    %Excess Electricity Sales
    
    
    74
    
    
    
    
    
    
    
    5,695
    
    
    
    8
    %Other
    
    
    453
    
    
    
    
    
    
    
    420
    
    
    
    1
    %Net Revenue
    
    $
    57,755
    
    
    
    100
    %
    
    $
    68,478
    
    
    
    100
    %
     22




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##### Table of Contents



Direct Energy Costs
    Operating Expenses
  Benefit from Income Taxes
  23




---



##### Table of Contents



Nine Months Ended April 30, 2006 Compared to Nine Months Ended April 30, 2005
  Nine Months Ended April 30,2006
    
    
    2005Dollars
    
    
    % Revenue
    
    
    Dollars
    
    
    % RevenueRetail electricity sales
    
    $
    131,049
    
    
    
    67
    %
    
    $
    140,635
    
    
    
    75
    %Natural gas sales
    
    
    55,646
    
    
    
    28
    %
    
    
    18,029
    
    
    
    9
    %Excess electricity sales
    
    
    6,963
    
    
    
    4
    %
    
    
    27,742
    
    
    
    15
    %Other
    
    
    1,119
    
    
    
    1
    %
    
    
    1,616
    
    
    
    1
    %Net revenue
    
    
    194,777
    
    
    
    100
    %
    
    
    188,022
    
    
    
    100
    %Direct energy costs
    
    
    174,664
    
    
    
    90
    %
    
    
    164,741
    
    
    
    88
    %Gross profit
    
    
    20,113
    
    
    
    10
    %
    
    
    23,281
    
    
    
    12
    %Selling and marketing expenses
    
    
    3,346
    
    
    
    2
    %
    
    
    2,986
    
    
    
    1
    %General and administrative expenses
    
    
    20,367
    
    
    
    10
    %
    
    
    23,029
    
    
    
    12
    %Loss from operations
    
    $
    (3,600
    )
    
    
    (2
    %)
    
    $
    (2,734
    )
    
    
    (1
    %)
  24




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##### Table of Contents



Net Revenue
  Nine Months Ended April 30,2006
    
    
    2005Dollars
    
    
    % Revenue
    
    
    Dollars
    
    
    % RevenueRetail Electricity Sales:California
    
    $
    49,051
    
    
    
    25
    %
    
    $
    46,784
    
    
    
    25
    %Pennsylvania/New Jersey
    
    
    49,884
    
    
    
    26
    %
    
    
    59,924
    
    
    
    32
    %Michigan
    
    
    18,047
    
    
    
    9
    %
    
    
    30,460
    
    
    
    16
    %All Other States, principally Texas
    
    
    14,067
    
    
    
    7
    %
    
    
    3,467
    
    
    
    2
    %Total Retail Electricity Sales
    
    $
    131,049
    
    
    
    67
    %
    
    $
    140,635
    
    
    
    75
    %Natural Gas Sales:California
    
    
    19,360
    
    
    
    10
    %
    
    $
    4,379
    
    
    
    2
    %Ohio
    
    
    22,939
    
    
    
    12
    %
    
    
    8,582
    
    
    
    4
    %Georgia
    
    
    7,816
    
    
    
    4
    %
    
    
    2,989
    
    
    
    2
    %All Other States
    
    
    5,531
    
    
    
    3
    %
    
    
    2,079
    
    
    
    1
    %Total Natural Gas Sales
    
    
    55,646
    
    
    
    29
    %
    
    
    18,029
    
    
    
    9
    %Excess Electricity Sales
    
    
    6,963
    
    
    
    3
    %
    
    
    27,742
    
    
    
    15
    %Other
    
    
    1,119
    
    
    
    1
    %
    
    
    1,616
    
    
    
    1
    %Net Revenue
    
    $
    194,777
    
    
    
    100
    %
    
    $
    188,022
    
    
    
    100
    %
    Direct Energy Costs
  25




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##### Table of Contents



Operating Expenses
  Initial Formation Litigation Expenses
  Benefit from Income Taxes
  Liquidity and Capital Resources
    26




---



##### Table of Contents



Contractual Obligations
  Factors That May Affect Future Results
 If competitive restructuring of the retail energy market is delayed or does not result in viable
competitive market rules, our business will be adversely affected.
   27




---



##### Table of Contents



We face many uncertainties that may cause substantial operating losses and we cannot assure
stockholders that we can achieve and maintain profitability.
  
    
    our ability to attract and to retain a critical mass of customers at a reasonable cost;
    
    our ability to continue to develop and maintain internal corporate organization and systems;
    
    the continued competitive restructuring of retail energy markets with viable competitive market rules;
    
    our ability to effectively manage our energy procurement and shaping requirements, and
to sell our energy at a sufficient profit margin; and
    
    our ability to obtain and retain credit at a reasonable cost to support future growth
and profitability.
 We may have difficulty obtaining a sufficient number of customers.
   We depend upon internally developed, and, in the future will rely on vendor-developed, systems
and processes to provide several critical functions for our business, and the loss of these
functions could materially adversely impact our business.
  28




---



##### Table of Contents



Substantial fluctuations in electricity and natural gas prices or the cost of transmitting and
distributing electricity and natural gas could have a material adverse affect on us.
  29




---



##### Table of Contents



The terms of our credit facility may restrict our financial and operational flexibility.
  If our net worth declines, our energy suppliers who extend credit to us may demand that we post
letters of credit or other additional collateral to support extensions of credit to us, which
could adversely affect our liquidity and our operations.
  If the wholesale price of electricity decreases, we may be required to post letters of credit to
secure our obligations under our term energy contracts.
  Some suppliers of electricity have been experiencing deteriorating credit quality.
  We are required to rely on utilities with whom we compete to perform some functions for our
customers.
   We are required to rely on utilities with whom we compete to provide us accurate and timely
data.
  30




---



##### Table of Contents



We are subject to federal and state regulations in our electricity and natural gas marketing
business and the rules and regulations of regional Independent System Operators, or ISOs, in our
electricity business.
    In some markets, we are required to bear credit risk and billing responsibility for our
customers.
  Our revenues and results of operations are subject to market risks that are beyond our control.
   
    
    weather conditions, including hydrological conditions such as precipitation, snow pack and stream flow;
    
    seasonality;
 31




---



##### Table of Contents




    
    unexpected changes in customer usage;
    
    transmission or transportation constraints or inefficiencies;
    
    planned and unplanned plant or transmission line outages;
    
    natural gas, crude oil and refined products, and coal supply availability to generators
from whom we purchase electricity; natural disasters, wars, embargoes and other
catastrophic events; and
    
    federal, state and foreign energy and environmental regulation and legislation.
 We may experience difficulty in successfully integrating and managing acquired businesses and in
realizing anticipated economic, operational and other benefits in a timely manner
  If we fail to maintain an effective system of internal controls, we may not be able to accurately
report our financial results or prevent fraud. As a result, current and potential stockholders
could lose confidence in our financial reporting which would harm our business and the trading
price of our stock.
   32




---



##### Table of Contents



Investor confidence and share value may be adversely impacted if our independent registered
public accountants are unable to provide us with the attestation of the adequacy of our internal
controls over financial reporting as of July 31, 2007, as applicable, as required by Section 404
of the Sarbanes-Oxley Act of 2002.
   Our results of operations and financial condition could be affected by pending and future
litigation.
    33




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
   
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  34




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
      35




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Stock Repurchases
  Issuer Purchases of Equity Securities
 (a)
    
    (b)
    
    (c)
    
    (d)MaximumNumber (orApproximateDollarValue) ofTotal Number
    
    Shares (orof Shares
    
    Units) thatAverage
    
    (or Units)
    
    may yet bePrice
    
    Purchased as
    
    PurchasedTotal Number of
    
    Paid per
    
    Part of Publicly
    
    Under theShares (or Units)
    
    Share
    
    Announced Plans
    
    Plans orPeriod
    
    Purchased
    
    (or Unit)
    
    or Programs
    
    ProgramsFebruary 1  28, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    March 1  31, 2006
    
    
    10,000
    (1)
    
    $
    .001
    
    
    
    
    
    
    
    April 1  30, 2006
    
    
    59,000
    (2)
    
    $
    1.79
    
    
    
    
    
    
    
    
 
 (1)
    
    The Company exercised its right of repurchase pursuant to the terms
of a restricted stock award agreement relating to shares of restricted common stock
issued pursuant to the Commonwealth Energy Corporation 1999 Equity Incentive Plan,
as amended (the Commonwealth Incentive Plan). Pursuant to the exercise of that
repurchase right, the Company purchased 10,000 shares of the Companys common stock
at $.001 per share.(2)
    
    Of the aggregate 59,000 shares of the Companys common stock repurchased, 4,000
shares of restricted common stock were repurchased at $.001 per share pursuant to
the Companys exercise of its repurchase right under a restricted stock award
agreement related to shares of the Companys common stock issued pursuant to the
Commonwealth Incentive Plan; and the remaining 55,000 shares of the Companys common
stock were purchased at $1.92 per share in a settlement of a dissenters rights
dispute relating back to the reorganization of the Company into a holding company
structure which was effective on July 6, 2004. 36




---



##### Table of Contents



Cancellation of Shares
  
 Item 5. Other Information.
   37




---



##### Table of Contents



Item 6. Exhibits.
  ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of Commerce Energy Group,
Inc., previously filed with the SEC on July 6, 2004 as Exhibit 3.3 to
Commerce Energy Group, Inc.s Registration Statement on Form 8-A and
incorporated herein by reference.3.2
    
    Certificate of Designation of Series A Junior Participating Preferred Stock
of Commerce Energy Group, Inc. dated July 1, 2004 previously filed with the
SEC on July 6, 2004 as Exhibit 3.4 to Commerce Energy Group, Inc.s
Registration Statement on Form 8-A and incorporated herein by reference.3.3
    
    Amended and Restated Bylaws of Commerce Energy Group, Inc., previously
filed with the SEC on July 6, 2004 as Exhibit 3.6 to Commerce Energy Group,
Inc.s Registration Statement on Form 8-A and incorporated herein by
reference.10.1
    
    Commerce Energy Group, Inc. Amended and Restated 2005 Employee Stock Purchase Plan, previously filed
with the SEC on February 1, 2006 as Exhibit 99.1 to Commerce Energy Group,
Inc.s Current Report on Form 8-K and incorporated herein by reference.10.2
    
    Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed with the SEC on February 1,
2006 as Exhibit 99.2 to Commerce Energy Group, Inc.s Current Report on
Form 8-K and incorporated herein by reference.10.3
    
    Commerce Energy Group, Inc. Amended and Restated Non-Employee Director Compensation Policy, effective
January 27, 2006, previously filed with the SEC on February 1, 2006 as
Exhibit 99.3 to Commerce Energy Group, Inc.s Current Report on Form 8-K
and incorporated herein by reference.10.4
    
    Commerce Energy Group, Inc. Amended and Restated Non-Employee Director Compensation Policy, effective
March 10, 2006, previously filed with the SEC on March 16, 2006 as Exhibit
99.1 to Commerce Energy Group, Inc.s Quarterly Report on Form10-Q for the
Quarterly Period ended January 31, 2006 and incorporated herein by
reference.10.5
    
    Settlement Agreement and General Release dated April 12, 2006, by and among
Commerce Energy Group, Inc., Commerce Energy, Inc. and Andrew V. Coppola,
previously filed with the SEC on April 18, 2006 as Exhibit 99.1 to Commerce
Energy Group, Inc.s Current Report on Form 8-K and incorporated herein by
reference.10.6
    
    Form of Subscription Agreement for the Commerce Energy Group, Inc. Amended
and Restated 2005 Employee Stock Purchase Plan, previously filed with the SEC on
April 20, 2006 as Exhibit 4.7 to Commerce Energy Group, Inc.s Registration
Statement on Form S-8 (File No. 333-133442) and incorporated herein by
reference.10.7
    
    Form of Notice of Withdrawal for the Commerce Energy Group, Inc. Amended
and Restated 2005 Employee Stock Purchase Plan, previously filed with the SEC on
April 20, 2006 as Exhibit 4.8 to Commerce Energy Group, Inc.s Registration
Statement on Form S-8 (File No. 333-133442) and incorporated herein by
reference.10.8
    
    Form of a Stock Option Award Agreement for U.S. Employees
pursuant to the Commerce Energy Group, Inc. 2006 Stock
Incentive Plan, previously filed with the SEC on April 20,
2006 as Exhibit 4.10 to Commerce Energy Group, Inc.s
Registration Statement on Form S-8 (File No. 333-133442) and
incorporated herein by reference.
 38




---



##### Table of Contents



ExhibitNumber
    
    Description10.9
    
    Form of a Non-Qualified Stock Option Agreement for Non-Employee Directors
pursuant to the Commerce Energy Group, Inc. 2006 Stock Incentive Plan,
previously filed with the SEC on April 20, 2006 as Exhibit 4.11 to Commerce
Energy Group, Inc.s Registration Statement on Form S-8 (File No.
333-133442) and incorporated herein by reference.10.10
    
    Form of a Restricted Share Award Agreement for U.S. Employees pursuant to
the Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed
with the SEC on April 20, 2006 as Exhibit 4.12 to Commerce Energy Group,
Inc.s Registration Statement on Form S-8 (File No. 333-133442) and
incorporated herein by reference.10.11
    
    Form of a Restricted Share Award Agreement for Non-Employee Directors
pursuant to the Commerce Energy Group, Inc. 2006 Stock Incentive Plan,
previously filed with the SEC on April 20, 2006 as Exhibit 4.13 to Commerce
Energy Group, Inc.s Registration Statement on Form S-8 (File No.
333-133442) and incorporated herein by reference.10.12
    
    Form of a Restricted Share Unit Award Agreement pursuant to the Commerce
Energy Group, Inc. 2006 Stock Incentive Plan, previously filed with the SEC
on April 20, 2006 as Exhibit 4.14 to Commerce Energy Group, Inc.s
Registration Statement on Form S-8 (File No. 333-133442) and incorporated
herein by reference.10.13
    
    Form of a SAR Award Agreement pursuant to the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, previously filed with the SEC on April 20, 2006
as Exhibit 4.15 to Commerce Energy Group, Inc.s Registration Statement on
Form S-8 (File No. 333-133442) and incorporated herein by reference.10.14
    
    Form of Performance Unit and Performance Stock Award pursuant to the
Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed
with the SEC on April 20, 2006 as Exhibit 4.16 to Commerce Energy Group,
Inc.s Registration Statement on Form S-8 (File No. 333-133442) and
incorporated herein by reference.10.15
    
    Form of Deferral Election Agreement for Deferred Share Units to the
Commerce Energy Group, Inc. pursuant to the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, previously filed with the SEC on April 20, 2006
as Exhibit 4.17 to Commerce Energy Group, Inc.s Registration Statement on
Form S-8 (File No. 333-133442) and incorporated herein by reference.10.16
    
    Commerce Energy Group, Inc. Amended and Restated Non-Employee Director Compensation Policy, effective
May 12, 2006, previously filed with the SEC on May 18, 2006 as Exhibit 99.1
to Commerce Energy Group, Inc.s Current Report on Form 8-K and
incorporated herein by reference.10.17
    
    Amended and Restated Form of Non-Qualified Stock Option Award Agreement
(for Non-Employee Directors) pursuant to the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, previously filed with the SEC on May 18, 2006 as
Exhibit 99.2 to Commerce Energy Group, Inc.s Current Report on Form 8-K
and incorporated herein by reference.10.18
    
    Form of Restricted Share Award Agreement (for Non-Employee Directors),
Initial Grant pursuant to the Commerce Energy Group, Inc. 2006 Stock
Incentive Plan, previously filed with the SEC on May 18, 2006 as Exhibit
99.4 to Commerce Energy Group, Inc.s Current Report on Form 8-K and
incorporated herein by reference.
 39




---



##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Principal Executive Officer Certification required by Rule 13a-14(a) of the Securities
Exchange Act of 1934.31.2
    
    Principal Financial Officer Certification required by Rule 13a-14(a) of the Securities
Exchange Act of Act of 1934.32.1
    
    Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Restricted Share Award Agreement (for U.S. Employees) pursuant to the
Commerce Energy Group, Inc. 2006 Stock Incentive Plan for Thomas L. Ulry dated June 8, 2006.
 40




---



##### Table of Contents



SIGNATURES
  COMMERCE ENERGY GROUP, INC.Date: June 14, 2006
    
    By:
    
    /s/ STEVEN S. BOSSSteven S. BossChief Executive Officer(Principal Executive Officer)Date: June 14, 2006
    
    By:
    
    /s/ LAWRENCE CLAYTON, JR.Lawrence Clayton, Jr.Chief Financial Officer(Principal Financial Officer)
 41




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of Commerce Energy Group,
Inc., previously filed with the SEC on July 6, 2004 as Exhibit 3.3 to
Commerce Energy Group, Inc.s Registration Statement on Form 8-A and
incorporated herein by reference.3.2
    
    Certificate of Designation of Series A Junior Participating Preferred Stock
of Commerce Energy Group, Inc. dated July 1, 2004 previously filed with the
SEC on July 6, 2004 as Exhibit 3.4 to Commerce Energy Group, Inc.s
Registration Statement on Form 8-A and incorporated herein by reference.3.3
    
    Amended and Restated Bylaws of Commerce Energy Group, Inc., previously
filed with the SEC on July 6, 2004 as Exhibit 3.6 to Commerce Energy Group,
Inc.s Registration Statement on Form 8-A and incorporated herein by
reference.10.1
    
    Commerce Energy Group, Inc. Amended and Restated 2005 Employee Stock Purchase Plan, previously filed
with the SEC on February 1, 2006 as Exhibit 99.1 to Commerce Energy Group,
Inc.s Current Report on Form 8-K and incorporated herein by reference.10.2
    
    Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed with the SEC on February 1,
2006 as Exhibit 99.2 to Commerce Energy Group, Inc.s Current Report on
Form 8-K and incorporated herein by reference.10.3
    
    Commerce Energy Group, Inc. Amended and Restated Non-Employee Director Compensation Policy, effective
January 27, 2006, previously filed with the SEC on February 1, 2006 as
Exhibit 99.3 to Commerce Energy Group, Inc.s Current Report on Form 8-K
and incorporated here by reference.10.4
    
    Commerce Energy Group, Inc. Amended and Restated Non-Employee Director Compensation Policy, effective
March 10, 2006, previously filed with the SEC on March 16, 2006 as Exhibit
99.1 to Commerce Energy Group, Inc.s Quarterly Report on Form10-Q for the
Quarterly Period ended January 31, 2006, and incorporated herein by
reference.10.5
    
    Settlement Agreement and General Release dated April 12, 2006, by and among
Commerce Energy Group, Inc., Commerce Energy, Inc. and Andrew V. Coppola,
previously filed with the SEC on April 18, 2006 as Exhibit 99.1 to Commerce
Energy Group, Inc.s Current Report on Form 8-K and incorporated herein by
reference.10.6
    
    Form of Subscription Agreement for the Commerce Energy Group, Inc. Amended
and Restated 2005 Employee Stock Purchase Plan, previously filed with the SEC on
April 20, 2006 as Exhibit 4.7 to Commerce Energy Group, Inc.s Registration
Statement on Form S-8 (File No. 333-133442) and incorporated herein by
reference.10.7
    
    Form of Notice of Withdrawal for the Commerce Energy Group, Inc. Amended
and Restated 2005 Employee Stock Purchase Plan, previously filed with the SEC on
April 20, 2006 as Exhibit 4.8 to Commerce Energy Group, Inc.s Registration
Statement on Form S-8 (File No. 333-133442) and incorporated herein by
reference.10.8
    
    Form of a Stock Option Award Agreement for U.S. Employees pursuant to the
Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed
with the SEC on April 20, 2006 as Exhibit 4.10 to Commerce Energy Group,
Inc.s Registration Statement on Form S-8 (File No. 333-133442) and
incorporated herein by reference.
 42




---



##### Table of Contents



ExhibitNumber
    
    Description10.9
    
    Form of a Non-Qualified Stock Option Agreement for Non-Employee Directors
pursuant to the Commerce Energy Group, Inc. 2006 Stock Incentive Plan,
previously filed with the SEC on April 20, 2006 as Exhibit 4.11 to Commerce
Energy Group, Inc.s Registration Statement on Form S-8 (File No.
333-133442) and incorporated herein by reference.10.10
    
    Form of a Restricted Share Award Agreement for U.S. Employees pursuant to
the Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed
with the SEC on April 20, 2006 as Exhibit 4.12 to Commerce Energy Group,
Inc.s Registration Statement on Form S-8 (File No. 333-133442) and
incorporated herein by reference.10.11
    
    Form of a Restricted Share Award Agreement for Non-Employee Directors
pursuant to the Commerce Energy Group, Inc. 2006 Stock Incentive Plan,
previously filed with the SEC on April 20, 2006 as Exhibit 4.13 to Commerce
Energy Group, Inc.s Registration Statement on Form S-8 (File No.
333-133442) and incorporated herein by reference.10.12
    
    Form of a Restricted Share Unit Award Agreement pursuant to the Commerce
Energy Group, Inc. 2006 Stock Incentive Plan, previously filed with the SEC
on April 20, 2006 as Exhibit 4.14 to Commerce Energy Group, Inc.s
Registration Statement on Form S-8 (File No. 333-133442) and incorporated
herein by reference.10.13
    
    Form of a SAR Award Agreement pursuant to the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, previously filed with the SEC on April 20, 2006
as Exhibit 4.15 to Commerce Energy Group, Inc.s Registration Statement on
Form S-8 (File No. 333-133442) and incorporated herein by reference.10.14
    
    Form of Performance Unit and Performance Stock Award pursuant to the
Commerce Energy Group, Inc. 2006 Stock Incentive Plan, previously filed
with the SEC on April 20, 2006 as Exhibit 4.16 to Commerce Energy Group,
Inc.s Registration Statement on Form S-8 (File No. 333-133442) and
incorporated herein by reference.10.15
    
    Form of Deferral Election Agreement for Deferred Share Units to the
Commerce Energy Group, Inc. pursuant to the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, previously filed with the SEC on April 20, 2006
as Exhibit 4.17 to Commerce Energy Group, Inc.s Registration Statement on
Form S-8 (File No. 333-133442) and incorporated herein by reference.10.16
    
    Commerce Energy Group, Inc. Amended and Restated Non-Employee Director Compensation Policy, effective
May 12, 2006, previously filed with the SEC on May 18, 2006 as Exhibit 99.1
to Commerce Energy Group, Inc.s Current Report on Form 8-K and
incorporated herein by reference.10.17
    
    Amended and Restated Form of Non-Qualified Stock Option Award Agreement
(for Non-Employee Directors) pursuant to the Commerce Energy Group, Inc.
2006 Stock Incentive Plan, previously filed with the SEC on May 18, 2006 as
Exhibit 99.2 to Commerce Energy Group, Inc.s Current Report on Form 8-K
and incorporated herein by reference.10.18
    
    Form of Restricted Share Award Agreement (for Non-Employee Directors),
Initial Grant pursuant to the Commerce Energy Group, Inc. 2006 Stock
Incentive Plan, previously filed with the SEC on May 18, 2006 as Exhibit
99.4 to Commerce Energy Group, Inc.s Current Report on Form 8-K and
incorporated herein by reference.
 43




---



##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Principal Executive Officer Certification required by Rule 13a-14(a) of the Securities
Exchange Act of 1934.31.2
    
    Principal Financial Officer Certification required by Rule 13a-14(a) of the Securities
Exchange Act of Act of 1934.32.1
    
    Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Restricted Share Award Agreement (for U.S. Employees) pursuant to the Commerce Energy Group, Inc. 2006 Stock Incentive Plan for Thomas L. Ulry dated June 8, 2006.
 44