Lehman Brothers Collection - Contemporary Business Archives

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Lehman Brothers Collection

Twentieth-Century Business Archives

Potomac Electric Power Company - Lehman Brothers Collection

Potomac Electric Power Company

List of Deals

The Potomac Electric Power Company (PEPCO) began operating in 1896 on the Virginia side of the Potomac River. The company then applied for permission to extend its lines into Washington, D.C. Later that year, PEPCO signed a contract to light the city. The company quickly became embroiled in short-lived competition with United States Electric Lighting. Soon thereafter, the Crosby-Stevens Syndicate, which controlled PEPCO, acquired the stock of United States Electric Lighting and merged the two companies.

In 1899 the company's president, Oscar Crosby, consolidated ten of the smaller independent car lines and the two electric power companies, including PEPCO, into the Washington Traction and Electric Company. In 1901, however, Washington Traction declared bankruptcy. The company was taken over by the Washington Railway and Electric Company the following year. In its first years under the Washington Railway and Electric Company, PEPCO was a captive of the traction interests. It supplied electricity to railroads, and its service generally stopped where the trolley ended. In 1905 PEPCO surpassed $1 million in revenues for the first time. By the end of 1914 PEPCO was running 24,818 meters and had 8,215 street lamps. It had surpassed $2 million in revenues.

World War I increased demand as well as inflation. At the same time, widespread use of the automobile moved the company's focus away from trolleys and toward residential and business customers. By 1925 the company was running over 100,000 meters. Three years later, the North American Company gained control of Washington Railway and Electric, and therefore of PEPCO as well. PEPCO continued to expand under North American. In 1929 it surpassed $10 million in sales for the first time. After World War II, North American was forced to comply with the 1935 Public Utilities Holding Company Act and transferred ownership of Braddock Light & Power, a small Virginia company, to PEPCO and then dissolved Washington Railway and Electric. In 1946 North American distributed PEPCO shares to its stockholders.

The post-World War II period was one of high growth and falling rates. By 1954 the company had surpassed $50 million in revenues. Between 1960 and 1970 the population of PEPCO's service area grew by 38 percent. The increased use of air conditioners led to a sharp difference between summer demand and winter demand. To balance the load, PEPCO began promoting "Gold Medallion" all-electric homes. The company was able to lower rates despite summer peak periods, which forced it to add more capacity, including a new generating station. PEPCO's financial situation changed dramatically in 1969, when rising construction costs squeezed earnings and caused the company to suspend cash dividends. The company's leaders applied for and were granted rate relief from regulatory authorities in Virginia, Maryland, and the District of Columbia. By the beginning of 1970 PEPCO was able to reinstitute its cash dividend, albeit at a somewhat lower rate.

During the 1970s the environment began to be a regulatory concern. PEPCO had taken pollution-control measures since the 1930s, but new regulations passed regarding thermal pollution and sulfur emissions caused it to evaluate its plants and to plan the installation of cooling towers for its steam-generating facilities. The company also built such devices as higher chimneys to collect fly ash. National economic problems were also producing problems for PEPCO, which faced high inflation, high capital costs, and high fuel costs. The company repeatedly asked for rate increases but often felt regulatory responses were inadequate. By 1971 the company had coal plants in the construction stage redesigned so they could burn up to 50 percent oil, since oil was inexpensive at the time. PEPCO also negotiated long-term contracts for fuel oil.

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