PENNSYLVANIA POWER & LIGHT COMPANY History

Address:
Two North Ninth Street
Allentown
Pennsylvania
18101
United States

Telephone: (215) 774-5151
Fax: (215) 774-5281

Public Company
Incorporated: 1920
Employees: 8,149
Sales: $2.39 billion
Stock Index: New York Philadelphia

Company History:

Pennsylvania Power & Light Company (PP & L) provides electricity to more than 2.5 million people living in a 10,000-square-mile area in eastern Pennsylvania. It is also involved in coal mining, refined-petroleum pipelines, and commercial and industrial building.

PP & L grew out of the consolidation of numerous small Pennsylvania electric utilities in the first two decades of the 20th century. The utilities included several small electric lighting companies formed in the 1880s in eastern Pennsylvania and the Edison Electric Illuminating Company of Sunbury, used by Thomas Edison to perfect central-station incandescent lighting in small cities and towns in Pennsylvania. Small electric companies proliferated at this time, and by 1900, 64 companies served 88 communities in the area PP & L later would serve.

In the 1910s a complicated series of mergers began consolidating the electric utilities into small regional companies. Pennsylvania Power & Light Company was formed in 1920 as a holding company for five territorially contiguous regional companies. PP & L, itself backed by another holding company called the Lehigh Power Securities Corporation, sold stocks and bonds to the public, but kept control of voting common stock of the utilities.

Like many other U.S. utilities, PP & L went through an important consolidation period in the 1920s, buying out other utilities, which in turn already had bought smaller utilities. It continued to expand its territory in this way, acquiring 5 utilities in 1923, 34 in 1928, and 21 in 1930, including the Edison Electric Company of Lancaster, Pennsylvania, one of the earliest U.S. electric companies. The early PP & L primarily supplied power for industry in Pennsylvania's coal-mining and steel-producing region, concentrated in the Lehigh River valley. By 1930, 70% of its power was used by industrial customers, and 45% of that went to coal-mining operations. PP & L also supplied small industry and agriculture in the Susquehanna River valley north of Harrisburg, capital of Pennsylvania. Allentown and Bethlehem were the largest cities in its territory, with populations of 90,000 and 60,000, respectively, in 1930. At this time PP & L's system consisted of a large territory with widely dispersed power plants, each with a relatively small network of transmission lines, and interconnections between the various systems.

PP & L and most other electric utilities were not greatly hurt by the Depression because of their status as protected, regulated monopolies. Most sales that were lost to declining industry were made up by increasing residential sales.

PP & L added hundreds of miles of high-voltage transmission lines to its system in the 1920s and 1930s, also building a 220,000-volt interconnection with two urban utilities, Philadelphia Electric Company and Public Service Electric & Gas Company of New Jersey. PP & L's industrial customers caused the company's load to peak in the morning, while the urban utilities' loads peaked in the late afternoon, when workers returned home. This led to an ideal power-sharing arrangement, although it required complex contracts to spell out which company would supply how much power under what circumstances.

PP & L took other steps to spread risks in its service area, shifting its emphasis from regions that had mined out their coal to regions with fresh coal seams. To encourage industrial use of power, the company charged industrial customers far lower rates than it charged residential and farm customers. Some political pressure was put on PP & L to change this practice, but it resisted, pointing out that it already encouraged rural electrification in other ways. PP & L had begun hooking up farmers rapidly in 1936, the year the U.S. government established the Rural Electrification Administration to make loans to farmers to create their own electric cooperatives. By 1939 57% of farms in PP & L territory had electricity, compared with a U.S. average of 28%.

In 1947 PP & L acquired two electric utilities and the Allentown, Pennsylvania, operations of another. By the following year the company had 487,000 customers, and revenue of $62 million. In 1949 and 1951, PP & L sold all its gas operations. It also sold its steam heating operations in Wilkes-Barre, Pennsylvania, in 1951, leaving it with steam operations in Harrisburg and Scranton, Pennsylvania. In 1953 it acquired Scranton Electric Company, and in 1955 Pennsylvania Water & Power Company. By 1955 it had about 7,000 employees, and operated in about 10,000 square miles of east central Pennsylvania. It supplied a population of 2.1 million people in a large number of communities including Allentown, Wilkes-Barre, Harrisburg, Lancaster, Bethlehem, Williamsport, Hazelton, Pottsville, Shenandoah, Shamokin, Mt. Carmel, Sunbury, and Scranton. The company owned one hydroelectric and eight steam power-generating stations and had 29,000 miles of transmission lines. Its principal fuel supply was purchased under 50-year contracts with coal companies based in Philadelphia and Reading, Pennsylvania.

PP & L spent about $142 million on new construction between 1954 and 1959, including the building of two new power-generating stations. It also spent about $4 million between 1958 and 1962 as its share of a joint project with Philadelphia Electric Company to develop a prototype nuclear power station. In 1961 the company built a new conventionally fueled power station at Brunner Island, Pennsylvania, with a capacity of 302,000 kilowatts. Between 1961 and 1965 the company reduced rates seven times. By 1964 29% of company electric revenue came from industrial customers. The company had begun pooling power with other companies in Pennsylvania, New Jersey, and Maryland. This interconnection had grown into one of the world's largest power pools, including many other electric utilities in a 48,700-square-mile area with a population of 18.4 million. In addition, PP & L planned $315 million in construction between 1965 and 1969, including two new power plants.

By 1972 PP & L owned seven steam, two hydroelectric, eleven combustion turbine, and five diesel-engine generating stations with a total capacity of about four million kilowatts. It announced plans to build a 2.2-million kilowatt nuclear generating station on the Susquehanna River between Wilkes-Barre and Bloomsburg, Pennsylvania, in the late 1970s.

PP & L began operating its own coal mines when commercial coal companies proved unable to meet the terms of PP & L's contracts. PP & L's ownership of mines protected the company from runaway fuel costs as well as interruptions in fuel supplies.

The power-sharing arrangement with Pennsylvania, New Jersey, and Maryland companies also was proving financially beneficial since PP & L was putting more electricity into the pool than it took out. In 1973 it sold 6.5 billion kilowatt-hours to other companies in the pool, and earned $67 million on revenue of $385 million. Escalating fuel prices and an economic recession following the oil embargo in 1973 and 1974 sharply cut the growth of power utilities. PP & L used coal for 96% of its fossil fuel needs. Much of that coal came from PP & L's own mines at below-market costs, helping to insulate the company from oil price increases. Even so, PP & L's sales growth dropped to 3% in 1974 from 7% in 1973. Power conservation was briefly in vogue, which further cut the demand for electric power.

In 1977 PP & L appointed an outsider as president when it named Robert K. Campbell, formerly with Western Electric, to the position. PP & L was considered one of the best-managed utilities in the United States, with a profit margin of 17%, compared to a U.S. industry average of 12%. Net income for 1978 was $149 million. In 1980 Standard Oil Company of Ohio signed an agreement with a PP & L subsidiary under which Standard mined coal on certain PP & L properties. In 1981 the Pennsylvania Public Utility Commission (PUC) approved a $101 million annual rate increase for PP & L that went into effect in 1982.

The company's Susquehanna nuclear power plant, delayed for years, was finally completed at a cost of more than $4 billion in 1982. In 1983 PP & L began the first of a series of incentive rates designed to increase usage and attract new industry. The central effort focused on pricing schemes that would sell more power during off-peak hours, increasing company revenue without requiring the construction of new power plants. The company also began consulting with industrial customers to enhance their uses for electricity. Encouraged by the initial response, PP & L expanded the program in 1987. PP & L also began testing new lighting systems designed to use light more efficiently. In the mid-1980s PP & L developed a lightweight steel transmission pole to replace its wooden poles, which were becoming expensive and scarce. In 1985 the Pennsylvania PUC approved only $121 million of a $330 million rate increase requested by the utility, boosting electricity prices about 8%. PP & L spent about $850 million on construction between 1987 and 1989.

The late 1980s were a good time for PP & L, with record sales and earnings in 1989, despite rate decreases and a softening economy in the northeastern United States. The company was following a strategy that stressed aggressive marketing, cost management, and increased sensitivity to customers. By 1990 PP & L's total generating capacity was 7.9 million kilowatts.

In 1990 the company decided to phase out its affiliated mining companies beginning in 1991, instead buying its coal through contract and on the open market. Mining its own coal had become more expensive than buying it on the open market and many of the company's mines were depleted. PP & L began working on plans to reduce its sulfur dioxide emissions by about 50% by 2000 because of pollution provisions in the 1990 Clean Air Act amendments. Also in 1990, PP & L began the $22 million renovation of two of the four coal-fired generating units at its Sunbury power plant. In addition, the company discovered that fuel oil was leaking into groundwater at its Brunner Island generating station, and that filters from that plant contained enough cadmium to be considered hazardous waste. Cleaning up these problems was expected to cost over $100 million during the next several years.

PP & L opened a new customer service office in Allentown as the beginning of a process of consolidating its customer service operations in a single location. Robert Campbell died in 1990 and John T. Kauffman became company president.

Principal Subsidiaries: CEP Group Inc.; Interstate Energy Company; Pennsylvania Mines Corporation; Rushton Mining Company; Tunnelton Mining Company; Realty Company of Pennsylvania; BDW Corporation; Green Hill Coal Company; Green Manor Coal Company; Lady Jane Collieries Incorporated; Safe Harbor Water Power Corporation (33%).

Further Reading:

Hughes, Thomas P., Networks of Power: Electrification in Western Society, 1880-1930, Baltimore, Johns Hopkins University Press, 1983.

Source: International Directory of Company Histories, Vol. 5. St. James Press, 1992.