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Twentieth-Century Business Archives

American Electric Power Co., Inc. - Lehman Brothers Collection

American Electric Power Co., Inc.

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During the dawn of the twentieth century, the electric utility industry in the United States was shifting from small, individually owned generator plants to consolidated single systems serving a large area. In 1906 Richard E. Breed, Harrison Williams, and Sidney Z. Mitchell formed American Gas & Electric Company (AG&E). For $6.28 million, AG&E purchased Electric Company of America's assets, including twenty-three small utility companies. The acquired companies supplied services that included gas, water, electricity, steam, and ice. In general, the companies' service was poor, their equipment faulty, and their rates high. Henry L. Doherty served as president of the new company until 1910, when Breed took over the position.

With Mitchell's experience in the industry as a guide, AG&E was able to increase its production and encourage consumption among its customers. By 1917 the company had increased the number of kilowatt-hours it provided from 53 million to 427 million. AG&E developed a plan to give away electric irons to new customers and free toasters to customers using the most electricity. The company also rented vacuum cleaners and ran cooking schools using electric ranges. This program increased consumer demand for electricity. The company was able to lower its rates as consumption increased and offered sliding-scale rates, determined by that ratio.

As AG&E continued to grow, it sold all of the gas utilities acquired in the original deal. The company also sold electric companies that could not be merged into a single system and acquired smaller companies that could be easily consolidated. The company constructed long-range transmission lines to link its properties; its system in Indiana became interconnected with the construction of a 32-mile-long tie line and the replacement of equipment in the area with more powerful generators. AG&E duplicated their success with this program in other regions.

The U. S. entry into World War I created a 40 percent increase in the demand for electricity. The post-war years saw a great increase in industrial expansion and thus the need for more power. Mitchell was a key figure in crafting the ideas upon which the first federal legislation regulating electric power, the Federal Power Act of 1920, was based.

Philip Sporn, an AG&E engineer, created a high-voltage, high-velocity circuit breaker in 1935. That same year, the Public Utility Holding Company Act was introduced, mandating that the company divest itself of two companies, Atlantic City Electric and Scranton Electric. AG&E was able to maintain ownership of its Central System, which ranged from Virginia to Michigan.

World War II caused an increase in the need for power; however, the company did not see marked growth during the post-war years. During the last years of the 1940s, the power industry picked up pace again, and in 1948 AG&E gained 82,000 customers. Philip Sporn became president of the company in 1947 and implemented a strategy of growth through acquisitions, sales promotions, and technological breakthroughs. The company increased its promotion of consumer appliances, such as air conditioners and heat pumps, as a means of increasing demand for electricity.

The company was renamed American Electric Power Company (AEP) in 1958. AEP continued to thrive and saw its stock prices doubling between 1958 and 1965.

A power failure in the northeast, which led to the 1965 blackout in New York City, was the impetus behind the formation of the North American Electrical Reliability Council. The Council determined a means of creating regional power pools, which could help avert such power failures in the future. During the 1960s, power utilities continued to consolidate, and AEP continued to grow through acquisitions. In the latter part of the decade, consumer demand was extremely high, and many companies found themselves unprepared to handle the need for service. In 1967, AEP purchased 2,200 megawatts of power equipment overseas so as to better meet demand.

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