New Jersey Resources Corporation
New Jersey Resources Corporation
Incorporated: 1922 as County Gas Company
Sales: $1.83 billion (2002)
Stock Exchanges: New York
Ticker Symbol: NJR
NAIC: 221210 Natural Gas Distribution
New Jersey Resources Corporation (NJR) is a holding company, whose primary subsidiary is New Jersey Natural Gas Company, provider of energy services to more than 425,000 residential, commercial, and industrial customers in central and northern New Jersey. In addition, NJR is involved through its NJR Energy Services Company in unregulated activities, such as gas supply, pipeline capacity, and storage management in New Jersey as well as a number of other states. Another subsidiary, NJR Home Services Company, repairs and services such household appliances as air conditioners, gas furnaces, hot water heaters, dryers, outdoor lights, and grills. NJR Power Services Company is involved in the distribution of emerging energy technologies such as fuel cells and microturbines.
Forming County Gas in 1922
The history of NJR started with a small utility called County Gas Company, located in Highlands, New Jersey, founded in 1922. At this time in the United States gas was still distributed by a multitude of small operations like County Gas, manufacturing their own product in local plants. Typically, gas was made by reducing coal to coke in a retort house, then piped to another facility where it was purified by lime. The gas was then piped to an immense tank called a gasholder or “gasometer.” This method of providing commercial gas would remain essentially unchanged until the 1930s and the advent of natural gas, which is found like other petroleum products trapped within the earth’s strata. Although used for centuries, natural gas was not a widely available energy source until the improvement of pipeline technology.
In 1929 County Gas was acquired by a large holding company, Public Service Corporation of New Jersey, and operated as part of its system until the years following World War II. At that time, the Securities and Exchange Commission pressured Public Service, involved in both the gas and electric businesses, to comply with the Public Utility Holding Company Act of 1935. Attorney Sidney M. Schreiber was quick to realize that County Gas would have to be divested, and he sought investors in order to buy the business. After being turned down by a Chicago investor, he enlisted James S. Abrams of a New York Investment firm, Allen & Co., who in turn recruited a colleague, Irving Koerner. Abrams also brought in two Chicago investors, Kenneth D. Knoblock and Frank O’Neill. The four men then contributed $10,000 each and borrowed $160,000 to purchase County Gas from Public Service for $200,000, the deal closing in 1948. In order to supply working capital Abrams personally borrowed an additional $60,000.
Abrams became the chairman of the board of County Gas, and Knoblock, a trained engineer who had worked in the gas industry in Wisconsin, was named the president. Because Knoblock knew that natural gas would quickly supersede “town gas” he took immediate steps to convert the company to the new system. Over the next decade, in fact, natural gas provided by wells in the southwestern United States began to be distributed throughout the country by thousands of miles of pipeline, making gas a popular choice for heating and cooking in the new housing developments that sprang up during the boom years of the postwar era. County Gas not only benefited from good economic times, it also took advantage of another holding company’s legal need to divest its gas business, and as a result grew five times in size overnight. General Public Utilities, in the cross hairs of the SEC, decided to focus on the electricity business and put Jersey Central Power & Light on the block. County Gas had but 14,600 customers in an area roughly 90 square miles in size, compared with Jersey Central’s 73,000 gas customers and territory of 950 square miles Nevertheless, the small utility, in October 1951, was able to submit a successful bid of approximately $16 million to acquire Jersey Central’s gas assets.
Name Change in 1952: New Jersey Natural Gas Company
Because County Gas had greatly increased the portion of New Jersey it served, management decided in 1952 to change the company’s name to New Jersey Natural Gas Company (NJNG). To fund the acquisition of Jersey Central’s gas properties, pay down debt, and sustain the ongoing conversion to natural gas, NJNG then made an initial public offering of stock, as well as mortgage bonds and serial notes to institutional investors. The company raised nearly $5 million through the sale of common stock and $14.5 million from bonds and notes. By the end of 1953 NJNG completed the conversion to natural gas and the manufacturing facilities of the “town gas” era were closed down. Also in that year Knoblock was replaced as president by Dale B. Otto, who over the next dozen years oversaw the company’s continued growth, which mirrored the postwar growth of the Jersey Shore counties of Cape May, Monmouth, and Ocean, and was further spurred by the rising popularity of gas appliances. In 1956 NJNG topped $1 million in net income for the first time. By 1962, with nearly 150,000 customers, it reached the $2 million mark.
In 1965 Otto stepped down as president in favor of W. Daniel Williams, who had been an executive with the company since 1952. It was during Williams’s tenure that NJNG faced the problem of a supply shortage. Although the company continued to add residential customers it could no longer add new large-volume customers. To meet this challenging situation, NJNG became one of the first utilities in the country to turn to liquid propane and liquefied natural gas. Nonetheless, the natural gas shortage grew so severe that in 1971 the company ceased to take on new residential customers and eliminated its sales department. As the fuel shortage continued NJNG had to restrict service to existing customers, denying the installation of new appliances and requesting that outdoor gaslights and swimming pool heaters not be used. On the supply side, the company invested in new LP plants, then in 1975 established an exploration and production subsidiary, New Jersey Natural Resources Company, to find new supplies of natural gas. Over the next couple of years the unit invested nearly $7.5 million in the effort.
Williams was replaced as president by James T. Dolan in January 1978, the same year that NJNG was able for the first time in seven years to add new customers and reinstate its marketing operation. The company enjoyed a record year, for the first time topping $100 million in annual revenues. Its exploration activities also were beginning to succeed when in 1978 its subsidiary discovered natural gas. In short order NJNG had interests in 57 wells located in New York, Louisiana, Oklahoma, and Texas. Moreover, the company sought to supplement its supply of natural gas by looking northward to Canada, becoming involved with several other distribution companies in the formation of Boundary Gas Inc. to import Canadian natural gas. To take advantage of natural gas as it became available through its various supply channels, NJNG also invested heavily to increase its storage capacity.
Involved in a variety of ventures, NJNG reorganized in early 1982. New Jersey Resources Corporation was formed as a holding company to accommodate NJNG and the businesses that grew out of it. With a market capitalization of $43 million NJR was subsequently listed on the New York Stock Exchange. The company made a minor adjustment a year later when it sold its operations in the southern part of the state to South Jersey Gas Company, due to the high cost of necessary upgrades. Instead, NJR used the proceeds of the sale to invest in its core territories. Later in the year, the company became the target of a hostile takeover attempt when NUI Corporation, owners of Elizabeth Gas, attempted to convince shareholders to elect a slate of directors friendly to a merger. The two companies became tied up in litigation and the matter lingered for nearly two years. In 1985 NJR shareholders rejected the NUI bid and the parties settled their legal differences, with NJR in the end agreeing to purchase the shares owned by NUI.
In the meantime, NJR continued to grow, bolstered by increasing supplies of natural gas. The first deliveries of Canadian gas through the Boundary agreement arrived in November 1984. In addition, other suppliers began to offer natural gas to Boundary participants and NJR secured delivery by reaching agreements with all four of the interstate pipelines that served New Jersey, becoming the only utility in the state to hold that distinction. Able to support strong growth, the company added 14,675 new customers in 1986 and now boasted 250,000 total customers. Two years later NJR topped the 300,000 mark.
We, the employees and leaders of NJR, are committed to meeting our customers’ energy needs for value, comfort and convenience.
Retirement of Longtime Chairman in 1987
NJR’s ties to its founders, however, were beginning to fray. In 1987, after serving some 40 years as the chairman of the board of County Gas, NJNG, and later NJR, James Abrams retired, replaced by Dolan. In 1991 Abrams passed away at the age of 81, and in that same year another founder, Irving Koerner, died at the age of 84. A total of 40 years had passed since tiny County Gas had acquired the Jersey Central gas assets and became New Jersey Natural Gas Company. The company owed its existence to strict regulation that forced large holding companies to divest some of their interests, and now it faced a future in which continued growth was very much dependent on how it adjusted to a deregulated business environment. In the 1990s the Federal Energy Regulatory Commission issued a number of orders that led to greater competition in the gas industry, including Order 636 in 1992, which forced pipelines to become little more than shippers of gas, rather than sellers and distributors as well. NJR sought to take advantage of this situation by selling natural gas and unused pipeline capacity outside of its New Jersey territory, so-called off-system sales. Not only did the company make money, it was able to buy natural gas in greater quantities, which resulted in lower prices for its New Jersey customers.
In 1995, with the naming of 37-year-old Laurence M. Downes as president and chief executive officer, NJR began taking further steps to adjust to a market-driven, highly competitive business environment created by deregulation. Downes had been with the company since 1985 and risen to the rank of chief financial officer. He believed that in order to better compete NJR needed to focus on its core natural gas distribution business, sell off peripheral assets, and pay down debt on the remaining assets. He soon divested NJR of its real estate assets, followed by the sale of oil and natural gas assets. All told, the company raised more than $135 million by selling off noncore assets. A much slimmer company, NJR was able within two years to post record levels of revenues, in 1997 posting $697 million in sales, as well as $39.9 million in net income. The success of Downes’s strategy was also reflected in the price of NJR’s stock, which was valued at $22 when Downes took office but by the end of October 1997 was nearly $33.
NJR under Downes’s leadership also proved to be a forward-looking company. In 1998, it became the first New Jersey utility to voluntarily offer its customers a choice of their natural gas suppliers. In that same year, NJR teamed up with NJ Transit to service the state’s mass transit needs with buses running on compressed natural gas, a much cleaner technology than gasoline or diesel-powered engines. In 1999 NJR and a subsidiary of General Electric agreed to market fuel cell technology to NJR’s residential and small business customers, becoming the exclusive distributor of GE’s MicroGen unit. Fuel cells allowed homeowners to produce their own electricity by running a natural gas-fired power plant using a microturbine housed in a cabinet the size of a refrigerator. Labeled “distributed generation,” electricity produced by fuel cells and other technologies allowed homeowners to not only supply much of their own power needs but to realize further savings by selling excess generation back to their local power company. Distributed generation offered great promise and, according to Downes during a U.S. Senate hearing in 2000, it had “the potential to change the electric industry in much the same way as PCs changed the computer business.” Moreover, microturbines released only carbon dioxide and water as waste materials, and their increased use would lessen the need for larger and less environmentally friendly power plants. Downes further told the Senators that every homeowner using a microturbine would be the environmental equivalent of removing two automobiles from the road. The use of fuel cells, of course, also would greatly enhance NJR’s business, because customers running such units would essentially double their gas consumption.
NJR also looked to expand its business in areas other than new technologies. In December 2000 it launched NJR Home Services to offer home-appliance repair, like many utilities around the country taking advantage of its relationship with customers and reputation for service to generate revenues in this nonregulated business. After 50 years since the creation of New Jersey Natural Gas, the company was generating more than $1.8 billion in annual sales, and with the market for natural gas expected to expand over the next two decades it was well positioned for many more years of strong growth.
New Jersey Natural Gas Company; NJR Service Corporation; NJR Energy Services Company; NJR Retail Holdings Corporation.
Conectiv; Orange & Rockland Utilities, Inc.; PSEG.
- County Gas Company is formed.
- Public Service Corporation of New Jersey acquires County Gas.
- Investors buy County Gas from Public Service.
- County Gas acquires gas assets of Jersey Central Power & Light.
- County Gas changes its name to New Jersey Natural Gas Company.
- A holding company, New Jersey Resources Corporation, is formed.
- Laurence M. Downes is named CEO.
Campanella, Frank W., “Gas to Burn,” Barron’s, December 15, 1980, p. 46.
New Jersey Natural Gas Company, A Half Century of Dedicated Service, Wall, N.J.: New Jersey Natural Gas Company, 2002.
Pandya, Mukul, “A Slimmer, Healthier Energy Company,” Business News New Jersey, November 3, 1997, p. 4.