Southwestern Public Service Company
Southwestern Public Service Company
Incorporated: 1921 as Roswell Public Service Company
Sales: $724.83 million
Stock Exchanges: New York Midwest Pacific
Southwestern Public Service Company’s primary business is generating, transmitting, distributing, and selling electric energy. The investor-owned company services 352,000 customers, and about one million people, in a 52,000-square-mile area that encompasses eastern and southeastern New Mexico, the Panhandle and South Plains areas of Texas, the Oklahoma Panhandle, and southwestern Kansas.
The economy of the area served by Southwestern depends heavily on the production, transportation, and processing of oil and natural gas. Also important are chemicals, minerals, light manufacturing, agriculture, and livestock. Southwestern operates ten power plants and has more than 5,700 miles of transmission lines, sending electric energy to 96 communities.
The roots of Southwestern Public Service go back to 1904, when the Roswell, New Mexico, City Council authorized the establishment of the Roswell Electric Light Company to serve the community’s 2,000 residents. The initial operations comprised a small high speed engine with a 24-kilowatt Edison spool-type direct-current generator, and two small low-pressure boilers carrying 85 pounds of steam pressure.
In 1910 controlling interest in the company was purchased by the Otis Company, a Cleveland, Ohio, investment house, which consolidated the company with the community’s gas supplier. The new organization was called the Roswell Gas and Electric Company. The company’s first steam turbine generator, a 500-kilowatt General Electric unit, was installed at the Roswell plant in 1915.
Roswell Gas and Electric ran into financial problems and was sold to the Roswell Public Service Company in 1921. In turn, the utility was sold to the Paul C. Dodge Company in 1925, and was renamed Southwestern Public Service Company.
At this time the region was still made up of small towns, each with its own limited, separate electric system. The new Southwestern quickly expanded beyond Roswell, providing the interconnections with other communities that helped drive the area’s growth.
Southwestern acquired an electric plant and distribution system in Artesia, New Mexico, and extended a 33-kilovolt transmission line from Roswell to Artesia. Also in 1925, the new company purchased two competing companies that were serving Carlsbad, New Mexico.
The following year marked the first expansion beyond New Mexico, as the Paul C. Dodge Company acquired the City Light and Water Company in Amarillo, Texas, and made it part of Southwestern. Dodge interests also acquired municipal plants in Panhandle and Pampa, Texas, and three small utilities in Arizona at Holbrook, Winslow, and Flagstaff. Because Arizona law forbade the merger of the latter three utilities into Southwestern, they were kept as operating subsidiaries.
After this rapid expansion, Dodge sold Southwestern in 1926 to Day & Zimmerman of Philadelphia, which then formed a holding company known as General Public Utilities Company. From 1926 until 1942, Southwestern was a subsidiary company in a complex pyramid of corporations that owned utilities in many states.
Between 1926 and 1928 Southwestern’s operations expanded rapidly with the installation of a 5,000 kilowatt steam turbine in Amarillo and the acquisition of small electric systems in the Texas towns of Claude, Groom, Vega, and McLean. The construction of the Amarillo-Pampa transmission line provided electric service for the first time to White Deer, Texas on Christmas Eve of 1926.
In 1928 General Public Utilities Company, which included Southwestern, was sold to another holding company, American Commonwealths Power Corporation, which had already acquired control of the Community Power & Light Company. Community Power & Light managed the former General Public Utilities Company properties until 1933, spanning a period during which the top holding company, American Commonwealths Power Corp. went into voluntary bankruptcy in 1932.
The Great Depression, beginning in 1929, caused serious financial difficulty for many utilities, sparking a demand for federal legislation to regulate the issuance of securities and eliminate holding company pyramids. The Public Utilities Holding Company Act of 1935 called for the dismantling of the holding companies in favor of electric utilities serving areas where economical physical interconnections could be made.
General Public Utilities, Inc., was organized in 1935 to take over the assets and liabilities of General Public Utilities Company, which had accepted voluntary bankruptcy proceedings. The common stock of Southwestern Public Service Company became part of the assets of General Public Utilities, Inc.
The complicated holding system was reorganized, leaving Community Power & Light Company as a holding company for its direct subsidiaries as well as for General Public Utilities, Inc., and its subsidiaries. The Community Power & Light companies were managed by Stone & Webster, New York, and the General Public Utilities companies were managed by Loeb & Shaw.
By 1939 the two holding companies had utility companies in ten states. At this time the management of Community Power & Light developed a Plan of Integration and Simplification covering both Community Power & Light Company and General Public Utilities, Inc., in order to obtain exemption from the Public Utility Holding Company Act of 1935.
Under the plan, approved by the Securities Exchange Commission, the company disposed of all properties located outside the territory of the proposed electric utility system. The companies sold were the Dakota Power Company, Nebraska Light & Power Company, Gothenburg Light & Power Company, Kansas Utilities Company, Missouri Utilities Company, and Consolidated Power & Light Company.
In turn, the company acquired the Panhandle Power & Light Company and Cimarron Utilities Company from the United Light & Power system. The Texas-New Mexico Utilities Company, a subsidiary of Community Power & Light, was liquidated and became part of Southwestern.
The company in its present form came into existence in September 1942 when Community Power & Light and General Public Utilities were merged into Southwestern Public Service Co., previously a subsidiary of General Public Utilities. The company still owned subsidiaries in Arizona, Arkansas, Florida, and Louisiana, but disposed of them over the next two years. With the sale of the Gulf Public Service Company in 1944, the company ceased to be a holding company and the SEC issued an order on December 5, 1944, making Southwestern the first electric utility exempt from the Public Utility Holding Company Act of 1935.
The SEC ruled, however, that the company must dispose of its eastern Texas properties because an economical physical connection with the primary system was implausible. In 1945, the company organized a new operating company, Southwestern Electric Service Company, to which it sold the eastern Texas properties.
Formation of the modern Southwestern service area was completed in 1946 with the purchase of electric and water properties in Dalhart, Dumas, and Stratford from the West Texas Utilities Company.
The area served by Southwestern grew rapidly after World War II. The principal cities served increased 77 percent in population from 1940 to 1950, and another 56 percent between 1950 and 1960.
The first Southwestern-designed generating unit went on line in 1948, and the first wholly Southwestern-designed power plant—the Plant “X” steam plant at Earth, Texas— opened in 1952.
In 1958 all the company’s gas and water properties, with the exception of the Water Department at Clovis, New Mexico were sold for $5 million to Lea County Gas Co. Clovis Water Co. was eventually sold in 1986 to American Waterworks Co.
Southwestern has made a number of important strides on the environmental front. In 1960 it pioneered the use of treated sewage effluent as cooling water and boiler water at its Nichols steam plant in Amarillo. Currently, three of its power plants use the effluent from city treatment facilities, which conserves enough water to provide for the daily needs of a community of 75,000 people. The company allows no discharge of waste water from any of its plants, in many cases making the water available for use in nearby agriculture.
Additionally, Southwestern’s two coal-fired power plants are among the cleanest in the United States in sulfur emissions, largely due to a decision to burn low sulfur western coal. In 1978 the company was the first electric utility in the nation to construct a “baghouse” on one of its Harrington units in Amarillo. Acting like vacuum cleaners, baghouses prevent ash produced by burning coal from escaping into the air.
In 1980 Southwestern acquired the electric production, transmission, and distributions systems of Tucumcari, New Mexico, and over the next four years acquired the electric distribution systems of Cochran Power & Light in Morton, Texas; New Mexico Electric Service Company in Hobbs, New Mexico; and of the cities of Crosbyton and Canadian, Texas.
Two non-utility subsidiaries, Utility Engineering Corp. and Quixx Corporation, were formed in 1986. Utility Engineering Corp. grew out of Southwestern’s in-house design department, which beginning in the late 1940s oversaw engineering and construction for all of the company’s facilities, including generating stations and office buildings.
One of Utility Engineering’s innovative projects was to help design the world’s largest circulating fluidized-bed-based power plant for the Texas-New Mexico Power Co. The technology uses limestone instead of scrubbers in the boiler to capture sulfur dioxide, and its boilers operate at lower temperatures, reducing emissions of nitrogen oxides. Utility Engineering was honored with Power magazine’s “1991 Powerplant Award” for its role in the project.
Quixx Corporation was formed to handle non-utility investments and resources. It operates Amarillo Railcar Services, a railcar maintenance facility that offers such services as inspection, storage, and repair. Quixx finances sales of heat pumps and other electric equipment, and markets other services such as data processing.
In 1991 Southwestern completed a 345-kilovolt transmission line to transport electricity from the company’s Tolk Station near Muleshoe, Texas to an interchange in Eddy County, New Mexico. The 157-mile-long line, which cost $37.3 million to install, allows greater flexibility in dispatching power. Also that year, Southwestern reached an agreement to provide wholesale power to Cap Rock Electric Cooperative, which serves 17 West Texas counties. Transmission lines are to be completed by 1993, making Cap Rock the 17th rural electrical cooperative to which Southwestern provides power.
With an eye on future needs, the company began two demonstration projects in 1991. The first involved use of electric-powered vans in a joint venture with Texas A&M University, West Texas State University, and the Texas Governor’s Energy Office. Two electric vehicles were used for company deliveries in Amarillo and Lubbock, while a third was made available to business customers for short trial periods. The emission-free vans were typically charged at night, when other electricity use is lower, resulting in efficient use of existing generating capacity.
The second project, testing the use of wind-generated power as a supplemental source of power, also involved the Texas Governor’s Energy Office. Southwestern contracted with International Wind Systems to install three 300-kilowatt wind turbines near Amarillo. The turbines, which were to be connected to the Southwestern system, were expected to generate about 600,000 kilowatt-hours of electricity per year, enough to supply the average energy needs of 200 homes.
Southwestern was recognized for its efficiency and progressiveness when the trade publication Electrical World named the company winner of its 1991 James H. McGraw Award for Management and Leadership. The magazine stated that Southwestern consistently achieved “high levels of performance in such diverse areas as power plant efficiency, environmental programs, economic development, engineering and design, and employee satisfaction.”
Company officials have attributed the success to a management philosophy of providing employees with the autonomy and flexibility to respond to challenges, and promoting from within the ranks so that managers understand operations. For instance, Bill D. Helton, who became chairman of the board in March 1991, began at Southwestern as a distribution design engineer in the 1960s and had a broad background in the company’s engineering, marketing, communications, and finance divisions.
In 1992 Southwestern implemented seven so-called “critical success factors” reflecting what the company felt it had to accomplish to continue to be successful: provide quality service; provide low cost of service; stimulate economic development of service area; sell into other markets; acquire new service areas; facilitate employee growth and development; and conduct successful nonregulated activities. Employee teams were formed to implement these critical success factors over a period of five years.
Utility Engineering Corporation; Quixx Corporation.
Nichols, H. L., The History of the Southwestern Public Service Company, New York, The New-comen Society, 1961; Southwestern Public Service Company: 1991 Annual Report, Amarillo, Southwestern Public Service Company, 1991; “Using Innovative Practical Ideas to Stay Competitive,” Electrical World, May, 1992.