Centerior Energy Corporation
Centerior Energy Corporation
Centerior Energy Corporation
6200 Oak Tree Boulevard
Independence, Ohio 44131
Sales: $2.37 billion
Stock Exchanges: New York Midwest Pacific
Centerior Energy Corporation is a public utilities holding company operating in Ohio through two electrical subsidiaries, The Toledo Edison Company and The Cleveland Electric Illuminating Company. Both subsidiaries operate in highly industrialized regions; principal industries include automotive, steel, chemical, and glass. The business climate remains attractive for heavy manufacturers and service alike.
Centerior was created in 1985, when Toledo Edison and Cleveland Electric Illuminating agreed to combine forces. The two companies officially came under the Centerior banner on April 29, 1986. The Securities and Exchange Commission approved the combination just ten months after it was applied for, a rapid pace for utilities merger approval. Each company retained its separate identity, while taking advantage of cost savings, initially estimated at $53 million annually.
Toledo Edison, the smaller partner, operates in northwestern Ohio, principally around the city of Toledo. Toledo is a major rail center, and an important Great Lakes port. Toledo Edison sells electrical energy at wholesale to 13 municipally owned power companies and one rural cooperative. The company has about 283,000 customers in its 2,500-square-mile operating region.
Toledo Edison was initially incorporated in 1901 as Toledo Railways & Light Company after absorbing Toledo Traction Company and Toledo Consolidated Electric Company. It added Toledo Gas, Electric & Heating Company in 1907.
In 1921 the company sold its street railway properties to Community Traction Company, and changed its name to Toledo Edison. In 1928 the company sold most of its natural gas operations to Columbia Gas System, Inc.
It acquired small power companies in the 1920s and 1930s, including Acme Power Company; Defiance Gas & Electric; Swanton Light & Power Company; Holgate Light & Power Company; Northwestern Light & Power Company; Dixie Light & Power Company; Toledo Suburban Electric Company; the electric properties of the Toledo, Ottawa Beach & Northern Railway; Apex Service Company; Lake Shore Power Company; and Ohio Utilities Finance Company.
In 1950 Toledo Edison’s parent company, Cities Service Company, was forced to divest itself of Toledo Edison to comply with the Public Utility Holding Company Act. Cities transferred the bulk of Toledo Edison’s stock to its own shareholders and sold the remainder to the public. Management remained the same, as did shareholder identity, for the most part. Toledo Edison was the last utility to be divested by Cities Service, which had once held 49 utility companies.
In the 1950s many regions suffered from power shortages. The postwar industrial boom demanded greatly increased capacity from electric companies; Toledo Edison, however, had no problems keeping up with the demand. In 1949 it added a 100,000-kilowatt generating unit to its Acme plant. Originally built in 1917, Acme was upgraded once more in 1951, and remained a central part of Toledo Edison’s power generation system. In 1955 the Bay Shore facility came into service, expanding greatly over the years. In 1965 the Richland Plant in Defiance started generating electricity via its combustion turbines; it was expanded in 1966. The Stryker Station, completed in 1968, produced combustion power also using turbines.
The late 1960s and 1970s saw a great deal of cooperation between regional electrical utility companies in the north central Ohio industrial corridor. In 1967 Cleveland Electric Illuminating Company, Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company, and Toledo Edison organized into the Central Area Power Coordination (CAPCO) group. CAPCO was to pool interests to build power generating facilities and transmission facilities. Limiting excess generating capacity is key to efficient operation of an electrical utility. Several CAPCO plants were built during the 1970s and 1980s, and the cooperative effects of the joint venture proved gainful to all of the companies participating.
CAPCO was successful in organizing regional bulk power distribution. It also forged Cleveland Electric Illuminating-Toledo Edison cooperative ties. The Davis-Besse nuclear plant, begun in 1970 and completed seven years later, was co-owned by Toledo Edison and Cleveland Electric; the project proved the two companies could work well together. Cleveland Electric’s business was very similar to Toledo Edison’s: they had similar corporate structures and similar mixes of residential, industrial, and commercial customers, and their service territories were nearly adjacent.
Cleveland Electric Illuminating Company had a long history like Toledo Edison and had experienced a nearly identical pattern of industrial development. The city of Cleveland was highly industrialized; its port handled coal and iron shipments and its rail lines served the city’s various steel, automotive, electrical and mechanical businesses, chemicals—including plastics and paints—and nonferrous metal fabrication. Since its incorporation in 1892 as Cleveland General Electric Company from the merger of the Brush Electric Light & Power Company and the Cleveland Electric Light Company, Cleveland Electric Illuminating had grown to meet the power requirements of a heavily industrialized region. Like Toledo Edison, it had been part of a holding company, in this case North American Company, which divested Cleveland Electric in 1947. After the divestiture and into the 1960s and 1970s, the utility enjoyed steady sales and earnings growth.
Cleveland Electric’s plants were mostly fossil-fuel powered. Coal, being readily available and popular in Ohio’s industrialized districts, made up the majority of the fuel requirements. Diversification of fuel began in the early 1970s. In 1970 two plants were converted to low-sulfur oil, and in 1972 the Seneca hydro-pumped plant was completed. Cleveland Electric also made strong commitments to nuclear power development through its CAPCO affiliation. In addition to Davis-Besse, Cleveland Electric participated in two other nuclear plants, Perry Unit 1 and Beaver Valley Unit 2, both of which went online in late 1987.
In 1985 Toledo Edison proposed an affiliation between that company and Cleveland Electric Illuminating. The merger would cut costs for both companies and provide the security of pooled power reserves for peak surges in either operating area.
Initial opposition to the proposed merger from competitors, local governments, and antinuclear groups was short-lived. By the end of April 1986, Centerior Energy was in the electricity business as the parent of Toledo Edison and Cleveland Electric Illuminating. Assets came to $11 billion; customers totaled 2.6 million. The name Centerior combined the words center and interior, which described the company’s location in the United States.
In 1986 Centerior’s construction expenditures totaled $1.1 billion. With the completion of Perry Unit 1 and Beaver Valley 2, the system’s power needs appear to be met through the 1990s, without major additions.
In November 1987 Beaver Valley 2 and Perry Unit 1 began providing power commercially. Meanwhile, the Davis-Besse plant was productive 84% of the year, a new high. By 1988 the company generated 27% of its power via nuclear facilities. In September 1987, the company transacted a $1.7 billion sale and leaseback deal that allowed Centerior to retire $860 million in high-cost debt and preferred stock. Also in 1987 the company reduced its work force by about 6% through a voluntary early retirement program.
In 1988, after finding it impossible to have its costs covered by current and future rate increases, Centerior wrote off $349 million of its investment in its nuclear construction program. The write-off resulted in the first loss, $74 million, in the history of Centerior, Toledo Edison, or Cleveland Electric Illuminating, but also ended the uncertainty surrounding the issue and reduced the possibility of litigation. The loss also led the company to reduce its common stock dividend. The utility began the 1990s with a focus on cutting costs along with an expectation of continued sales growth in the increasingly diversified northern Ohio market.
The Toledo Edison Company; The Cleveland Electric Illuminating Company; Centerior Service Company.
Maugans, Edward H., “The Cleveland Electric-Toledo Edison Affiliation: Stars in the Right Places,” Public Utilities Fortnightly, July 24, 1986.
—Thomas M. Tucker