ATLANTIC ENERGY, INC. History
Pleasantville, New Jersey 08232
Telephone: (609) 645-4500
Fax: (609) 645-4353
Incorporated: 1924 as Atlantic City Electric Company
Sales: $777.97 million
Stock Exchanges: New York Pacific Philadelphia
Atlantic Energy, Inc. (AEI) is the holding company for Atlantic City Electric Company (ACE), a public utility primarily engaged in the generation, transmission, and sale of electric energy to a service area that includes 2,700 square miles in southern New Jersey and has a population of almost one million people. AEI is also the holding company for four other subsidiaries: ATE Investment; Atlantic Energy Technology, Inc.; Atlantic Generation, Inc.; and Atlantic Southern Properties, Inc. However, approximately 95 percent of the consolidated group's assets belong to ACE.
AEI's history began in 1886 when the Electric Light Company of Atlantic City was founded as a response to the city's development as a thriving resort for the middle class, a place where large numbers of workers from the mills and factories went to escape the congestion of their urban neighborhoods, relax, and enjoy the beach. With two generators from Thomas Edison's new manufacturing company, Electric Light supplied electricity from dusk to 1 A.M. for roughly 25 cents a kilowatt-hour. Soon the demand for electricity extended beyond lighting. Two years after its founding, Electric Light hooked up the first printing-press motor and the first electrically driven merry-go-round. One year later, electric trolley service began in Atlantic City. By 1892, the year electric lights were installed in the city's hotels, the company was supplying electric service 24 hours a day.
In the wide-open and chaotic early days of New Jersey's utility industry, entrepreneurs began organizing competing utilities and challenging Electric Light's position in southern New Jersey. The operational shortcomings of such a system soon became apparent; order had to be brought to the fledgling utility industry if it was to prosper. In 1907, Electric Light made a move in this direction when it merged with three other Atlantic City utilities--Atlantic City Electric Company, Atlantic Light and Power Company, and New Jersey Hot Water Heating Company--to form the new Atlantic City Electric Company under the stewardship of a holding company, American Gas and Electric.
The utility thrived, since it could now provide electricity at a lower cost than smaller companies. With the profits, ACE invested in bigger and newer generators, which were making the utility industry more efficient. As a reflection of its new prosperity, ACE constructed a modern operating plant in 1910.
ACE continued to buy smaller utilities and merge them into its distribution system. On April 28, 1924, ACE incorporated after merging with four other utilities: Cape May Light and Power Company, Hammonton Electric Light Company, West Jersey Electric Company, and the Cape May County Electric Company.
The Depression hit New Jersey hard, but ACE actually grew during the period, and in fact had a difficult time keeping up with the growing demand for electricity. During the 1930s, the utility constructed a generating plant at Deepwater and, in collaboration with Dupont Chamber Works, helped pioneer cogeneration technology, in which the heat generated during various industrial processes is used to make electricity.
The end of World War II marked the beginning of a new era for ACE. After almost ten years of discussion and negotiation that followed the Holding Company Act of 1935, American Gas and Electric was ordered to sell its interest in ACE. Four years later, ACE divested itself completely from American Gas and Electric.
At the same time, ACE began to play an increasingly important role in New Jersey's economic development. Realizing that transportation was the key to growth and development, ACE pushed for construction of the Delaware Memorial Bridge and the New Jersey Turnpike in 1951, and later, the Garden State Parkway and the Atlantic City Expressway, initiatives that made southern New Jersey a major highway corridor.
During this growth period, ACE acquired a number of utilities, including the Deerfield Packing Company's electric distribution system at Seabrook Farms, Cape May County's electric distribution system at Wildwood Airport, the Deepwater Light and Power Company's portion of the steam generating station at Deepwater and the Millville Electric Light Company. In the 1950s, the utility also added another generator at Deepwater, began building its biggest plant at Beesley's Point, and installed its first 'jet turbines' to provide increased power. ACE's growth continued into the 1960s, yet it continued to have trouble keeping up with customer demand for electricity, which was increasing about ten percent a year. In 1962, the utility's B. L. England Generating Station began operation.
By the latter half of the 1960s, environmental concerns arose regarding the use of coal to generate electric power, including air pollution and environmental damage caused by mining operations. As a result, ACE switched its plants from coal to oil. The B. L. England Generating Plant at Beesley's Point became the first generating plant to burn only oil.
The following year, John Feehan, ACE's vice president of production, testified at a hearing before the Department of Environmental Protection. His statement proved to be remarkable in its forecast of the energy situation to come. Feehan warned that 'elimination of coal and complete dependence on foreign oil (also) subjects us to uncontrolled price escalation by the producing nations and by the oil companies.... Placing the nation in this dependence and vulnerability could result in our being brought to our knees by a cutoff of this foreign oil, even worse, being driven into an international confrontation and conflagration because this life-blood has been cut off.' Two years later, OPEC implemented its oil embargo and startled the United States into realization of the extent of its dependence on oil. The crisis, however, affected other utilities more severely than ACE because the New Jersey utility had a supply of 173,000 tons of coal on hand.
After the 1973 oil embargo, ACE realized that it would have to change in order to survive and prosper. Diversifying its fuel sources and searching for alternate sources of energy became priorities. ACE entered the field of nuclear power, buying a share in the Peach Bottom Atomic Power Station, which was owned by the Philadelphia Electric Company. By 1984, the company's coal and nuclear energy sources provided more than 80 percent of the system's needs.
The company, meanwhile, stopped advertising and began to look for ways to encourage energy conservation. It began supplying customers with services such as loans for insulation, home energy analyses, weatherization devices, grants for domestic solar and water heating systems, and rebates for high efficiency heat pumps and air conditioners. It also began to put more emphasis on research in the belief it would lead to greater energy efficiency. Such imaginative and innovative approaches to promoting energy efficiency were rewarded when ACE won the Outstanding Electric Utility of the Year Award in 1981.
In 1987 Atlantic Energy, Inc., the holding company for ACE, was formed. In its first annual report to its shareholders, AEI could boast about its financial stability and record-setting performance. For 35 consecutive years dividends paid per share had increased. The utility's energy sales had grown by 7.6 percent over the previous year, exceeding the 7 billion kilowatt-hour level for the first time. Peak demand in 1987 increased by 10.3 percent over the record set in 1986. The year was also the safest in the utility's recent history.
AEI did have one negative development to report, regarding power generation from its nuclear units. The Nuclear Regulatory Commission had shut down the Peach Bottom Atomic Power Station, in which ACE had 7.51 percent ownership, following incidents of unacceptable conduct by the station's operators. AEI called upon Peach Bottom's management to 'effectively respond to concerns expressed by NRC' so that the plant could be returned to operation safely and promptly. However, the plant was not reopened until 1989, resulting in a loss of profits for AEI.
In the annual report, AEI noted that 1987 was a watershed year. It predicted more growth in the future, which would provide additional opportunities for strong financial performance. In addition, the utility indicated it would push for the further development of the holding company structure, in which the new business units would support and complement the utility: Atlantic Generation would continue to develop cogeneration arrangements, Atlantic Investment would seek to increase income through investment, and Atlantic Southern Properties would develop the company's real estate holdings. Atlantic Energy Technology, added later, was developed to move the company into the area of electrical hardware.
The year 1988 marked the first full year for AEI as a holding company. Start-up activities of the subsidiaries came more slowly than AEI would have liked, but progress occurred nevertheless. The company was able to report that its record of good dividend performance continued. Dividends per share increased for the 36th consecutive year.
Two years later, AEI was forced to announce that earnings per share had decreased 19 percent due to factors related to weather, conditions within the industry, and the general downturn in the American economy. Nevertheless, with a growing service area, a diversified structure, and a progressive approach to both technology and business management, the board of directors for AEI predicted a reversal of this setback in future years and remained optimistic that the company could weather tough economic times as it had in the past.
Principal Subsidiaries: ATE Investment; Atlantic City Electric Company; Atlantic Energy Technology, Inc.; Atlantic Generation, Inc.; Atlantic Southern Properties, Inc.
Further Reading:Atlantic Electric: Celebrating One Hundred Years, 1886-1986, Pleasantville, Atlantic City Electric Company, 1986.
Source: International Directory of Company Histories, Vol. 6. St. James Press, 1992.