Ohio Edison Company
Ohio Edison Company
Sales: $2.23 billion
Stock Exchanges: New York Midwest
Ohio Edison Company is the 17th-largest investor-owned electric company in the United States in terms of kilowatt-hour sales. The company and a subsidiary, Pennsylvania Power Company, serve more than one million customers in a 9,000-square-mile region of central and northeastern Ohio and western Pennsylvania.
Ohio Edison Company was formed in the early months of the Great Depression and incorporated in June 1930 by The Commonwealth and Southern Corporation to consolidate five Ohio public utility companies. Those companies were Northern Ohio Power & Light Company of Akron, The Pennsylvania-Ohio Power & Light Company of Youngstown, The Ohio Edison Company of Springfield, The London (Ohio) Light & Power Company, and The Akron Steam Heating Company. The oldest of the five dates back to 1883, while predecessor companies, which include more than 300 already consolidated companies, date back to the Civil War.
The new Ohio Edison Company was a subsidiary of The Commonwealth & Southern Corporation, a New York-based holding company that bought all 600,000 shares of Ohio Edison’s stock for $15 million in cash. Headquarters were established in Akron, Ohio, and A.C. Blinn was named vice president and general manager to lead the company, which began operations without a president.
Through consolidation, the parent company planned to improve the financial picture of the five companies by pooling resources. Upon incorporation of Ohio Edison, transportation assets belonging to the five former companies were transferred to three transportation companies, which for the first few years were operated under Ohio Edison’s control before being spun off as separate entities.
During its first full year of operation Ohio Edison grew despite the Depression. A new office building was constructed in Youngstown; and electric distribution systems were acquired through a trade, which brought Ohio Edison properties in Ravenna, Medina, Doylestown, and Seville, Ohio, in exchange for less-profitable assets north of Springfield, Ohio. In 1931 Ohio Edison also began construction of an East Akron power transmission line, which replaced power purchased from a Cleveland utility company.
The company’s finances remained strained during the Depression, however, affecting personnel from top to bottom. Both lower level and senior management workers took pay cuts to keep their jobs, and stockholder dividends were suspended. The company often had to wait for customers to pay their bills, but it met its payrolls.
As a means of boosting electric sales, from its outset Ohio Edison promoted and marketed electric appliances, an aspect of operations that endured for more than four decades. During the early 1930s division offices established small appliance service departments and sales departments, which expanded their inventory as new products entered the marketplace.
Blinn was named Ohio Edison’s first president in 1938 and continued to guide the company through most of World War II. After the United States entered the war in 1941, Ohio Edison and other utilities were placed under supervision of the War Production Board and were temporarily restricted from selling appliances and constructing new power lines.
Industrial electricity sales skyrocketed with wartime production. In response to increased need for power generation during the war, Ohio Edison constructed the new R.E. Burger plant in Belmont County, Ohio, and expanded plants in Akron, Marion, and Warren, Ohio.
In 1944 Blinn was replaced as president by the expansionminded Walter Sammis, who had been instrumental in forming the company 14 years earlier. In 1944 in one of his first moves as president, Sammis orchestrated the acquisition of Pennsylvania Power Company (Penn Power) from Commonwealth & Southern. Penn Power had been incorporated through a consolidation move the same year Ohio Edison was formed, and as a new wholly owned subsidiary, it gave the Ohio Edison system more than 1,500 square miles of service area in western Pennsylvania.
Following the war, restrictions on utilities were lifted. Postwar prosperity made it easier to obtain credit, and Ohio Edison sales of new appliances boomed. At the same time, industrial expansion gave rise to increased residential and nonresidential electric sales and left the company in need of increased power generation. Ohio Edison responded to that need in the first few years following the war with additions to the Burger Plant and facilities in Springfield and Akron.
In its first postwar acquisition, in 1946 Ohio Edison acquired an electric distribution system serving McDonald, Ohio. Ohio Edison became an independent company in 1949 after the Securities and Exchange Commission (SEC) forced Commonwealth & Southern to divest its interests in Ohio Edison.
As a result of another SEC divestiture order, in 1949 Ohio Edison’s competitor, Ohio Public Service Company (OPS), also became an independent company, and in 1950 Ohio Edison acquired OPS. The OPS merger added the Ohio communities of Sandusky, Marion, Mansfield, Massillon, Lorain, and Warren to the Ohio Edison system, pushing the company’s customer base to more than 500,000 and making Ohio Edison the tenth-largest electric utility in the United States in terms of operating revenues.
To offset rising operating costs, in 1950 Ohio Edison initiated its first rate increase, which added about 22C a month to the average residential bill. During the mid-1950s Ohio Edison continued to add to its system and acquired distribution systems in the Ohio communities of Leroy, Huron, and Plain City.
To keep pace with those acquisitions and increased electrical use, postwar power plant expansion followed; and in 1954 the company added a new plant in Niles, Ohio. Additions to the Burger plant and the Edgewater plant in Lorain, Ohio, followed, and in 1959 the W.H. Sammis plant in Stratton was opened.
By the early 1960s Ohio Edison’s service area had grown to within five miles of Cleveland’s city limits, and Penn Power was within three miles of Pittsburgh. In 1962 Penn Power expanded its service area northward from Pittsburgh and acquired a 121-square-mile distribution system in Crawford County, Pennsylvania, abutting the parent company’s Ohio network.
After 20 years at the helm, in 1964 Sammis retired and was replaced as president by D. Bruce Mansfield, who quickly moved Ohio Edison into an era of electric utility power pools formed through joint plant ownership. In 1965 Ohio Edison acquired the municipally owned distribution system of Lowellville, Ohio, just southeast of Youngstown. That same year Ohio Edison made its first move toward forming a power pool and joined with Cleveland Electric Illuminating Company (CEIC) to construct and operate a power plant addition for their common areas of service.
In 1967 Ohio Edison and Penn Power joined with CEIC, Duquesne Light Company, and Toledo Edison Company to form a power pool known as Central Area Power Coordination Group (CAPCO). Designed to share the burden of constructing and operating power plants, the CAPCO members initially committed to the installation of six large generating units.
In 1970 Ohio Edison, through a CAPCO project, began construction in Shippingport, Pennsylvania, on the firm’s first nuclear-powered facility, Beaver Valley Power Station. Three years later the company discontinued its appliance sales operations, which had been declining since the 1950s.
Service area expansion continued. In 1972 Ohio Edison acquired the 5700-customer municipal electric system of Norwalk, Ohio. It added the Hiram, Ohio, municipal system serving 271 customers and the former East Palatine, Ohio, municipal systems with its 2,653 customers in 1975.
John R. White, a former executive vice president and 22-year veteran of the company, succeeded Mansfield as president in 1975. That same year CAPCO’s first new facility, the Bruce Mansfield plant in Shippingport, Pennsylvania, began operation under control of Penn Power, and in 1976 the first unit of the Beaver Valley nuclear plant began operation under the control of Duquesne Light Company; Ohio Edison owned a 35% share.
Despite the company’s increased power capacity, White’s five-year tenure as president was marred by weather, labor, and environmental complications. A long period of sub-zero days in January 1977, resulted in record electricity demand and made the Ohio River impassible for barges bringing coal to company plants. One year later, the worst blizzard in Ohio’s history, on January 26 and 27, resulted in major power outages, with high winds and frigid temperatures stalling repairs for a time.
In 1978 a 109-day coal miners’ strike depleted the company’s fuel reserves at its coal-fired generating plants, forcing Ohio Edison to turn to backup generating sources and to purchase power from other utilities. That same year, 2,000 members of the Utility Workers Union of America went on strike for two months at five of Ohio Edison’s nine plants and its two largest power-line operations. Foremen, supervisory personnel, and technicians ran the utility’s operations. The strike was resolved only after the utility threatened to hire permanent replacement workers.
During the miners’ strike the U.S. Environmental Protection Agency (EPA) filed suit against Ohio Edison to push the company into compliance with the Clean Air Act standards and install pollution-control devices. In a settlement reached three years later, Ohio Edison agreed to pay the government more than $1.5 million for past emission violations and install more than $500 million in antipollution devices, with the bulk earmarked for the company’s Sammis Plant.
Mansfield retired in 1980 and was replaced by Justin T. Rogers, Jr., an executive vice president and 22-year veteran of the company. Rogers took over a company that officials conceded was suffering from inflation, a bulging construction budget, high fuel prices, and a low bond rating.
In one of his first moves as president, Rogers took Ohio Edison out of what had become its unprofitable steam power operations; in addition, steam systems in Akron and Youngstown were sold and a similar operation in Springfield abandoned. Citing the political and regulatory problems facing nuclear plants following the 1979 accident at Three Mile Island power plant, in 1980 CAPCO agreed to cancel four nuclear power plants scheduled for construction.
Including the 1981 settlement with the EPA over emission controls at the Sammis plant, during his first two years in office Rogers led the company over four major legal hurdles. In February 1980 Ohio Edison was one of four utilities that agreed to settle an antitrust suit filed by the city of Cleveland five years earlier. Ohio Edison denied charges of conspiring to force the city’s municipal electric light plant out of business, but agreed to pay $500,000 to the city to avoid future litigation. It also was to provide technical assistance to the city’s plant.
In March 1980 Ohio Edison dropped a one-year-old suit against Exxon Corporation over delivery of nuclear fuel, after Exxon agreed to renegotiate its contract. One year later North American Coal Co. consented to dropping a breach-of-contract suit it had filed against Ohio Edison, after the fuel supplier agreed to a contract giving the utility more favorable options for the purchase and delivery of coal.
With the help of new contracts, by 1982 Ohio Edison’s average fuel costs were the lowest in the state for an investor-owned electric company. That same year Rogers began streamlining operations and cutting staff.
The company also began marketing its increased electric generating capacity in 1982 and during the next two years landed long-term bulk-sales contracts with utilities in New Jersey, Ohio, and Washington, D.C. To increase industrial sales in its own service area, in 1984 the company initiated a price incentive program for new or expanding industries.
In 1985 Ohio Edison suspended construction of the second unit of a nuclear power plant at North Perry, Ohio, but continued work on its Perry 1 and Beaver Valley 2 nuclear units, which became operational in November 1987. To reduce the revenue required to provide a profit on the two nuclear units, upon their completion Ohio Edison agreed to sell and then lease back portions of the units, while retaining a 41 % interest in Beaver Valley 2 and 35% of Perry 1.
With the opening of the two nuclear units, Ohio Edison’s credit rating received a boost in 1987. That same year, the company negotiated a 13-year coal contract with North American Coal. Ohio Edison also renegotiated a power sale agreement with Potomac Electric Power Company of Washington, D.C., in 1987, with an 18-year agreement expected to give Ohio Edison $150 million in annual sales.
With bulk sales on the rise and Ohio Edison’s service area seeing an influx of diverse business and industry, in 1988 Ohio Edison’s total sales surpassed the $2 billion mark for the first time. That same year the company formed two wholly owned finance-related subsidiaries, OES Capital, Incorporated and OES Fuel, Incorporated. Both subsidiaries began doing business in 1989, with OES Capital financing customer accounts receivable and OES Fuel financing the purchase of nuclear fuel.
During the late 1980s Ohio Edison began to actively change its image on environmental matters. In 1989 a coal technology project that reduced emissions at its Lorain, Ohio, plant received the Ohio Governor’s Award for Outstanding Achievement in Waste Management and Pollution Control. In 1990 Ohio Edison began studying the feasibility of burning treated municipal waste at coal-fired generating plants and became the first Ohio utility to test-burn waste tires. The following year Ohio Edison was one of a group of utilities that won a $33 million government contract to build a system at the company’s Niles plant to reduce pollutants associated with acid rain.
In line with its ongoing plans to trim payroll costs, in 1990 Ohio Edison initiated an employee stock ownership program to help the company reduce costs of matching contributions to employee savings plans. That same year Ohio Edison’s bonus program for senior management was suspended. Ohio Edison began 1991 with 1,100 fewer employees than it had a decade earlier and was committed to further work force reductions.
The company’s future plans call for delaying costly plant construction by encouraging off-peak hour use through rate incentives, maintaining its customer base through a public image of a utility with staying power and reasonable rates and broadening its sales through further incentives to new and expanding businesses. The company appears well positioned with enough generating capacity to carry it through the 20th century and to accommodate anticipated sales growth both in its service area and through power sale agreements. Ohio Edison seems poised to meet the 1996 compliance deadline established for the 1990 Clean Air Act amendments, with almost half of the company’s generating capacity coming from nuclear or other units that will not need major additions of sulfur-dioxide control equipment.
Pennsylvania Power Company; OES Capital, Incorporated; OES Fuel, Incorporated.
The Fiftieth Anniversary Issue: Ohio Edisonian, Akron, Ohio, Ohio Edison Company, 1980.
—Roger W. Rouland