Abstract
After disparate experiments in the
U.S. and abroad, beginning with Michael Faraday's in 1831,
electricity owes its origins as an energy infrastructure in the
U.S. to Thomas Edison's work in the late 1870s. Edison was not
just exploring the properties of electricity. Rather, he and the
members of his laboratory were examining the attributes of
electricity in the context of solving a particular problem:
devising a system of interior illumination that was competitive
with gas. The gas companies also provided Edison with his model
of organization, distribution, and delivery of services to
prospective customers. Thus, he conceptualized a specific
product -- lamps -- in terms of a technological and an
organizational system that contained generation, transmission,
regulation, and delivery of electrical power together with a
mass production manufacturing process and a corporate management
structure.
Quickly, however, electric
illumination split off into separate but related companies that
manufactured and sold appliances and equipment or provided
services to power users. Eventually, power generation and
distribution itself divided into the power producers (whether
hydro or coal), the electrical transmission companies, and the
local utilities. Separate from these companies were the
financiers. Most of these entities formed interlocking
relationships that culminated in the organization of holding
companies after 1910.
The advantages of the holding
companies were that they stabilized financially precarious small
utility companies and supplied management and engineering
expertise, thus implicitly standardizing operations and
equipment. The disadvantages were that they tended to reduce
competition and were said to be unresponsive to local needs.
Moreover, since the companies were highly leveraged, a tremor in
one part of the organizational system could and did have
far-reaching repercussions for consumers. Samuel Insull's
electric power holding company controlled and generated
one-eighth of the nation's power in 1931, and when the company
failed, it affected over 1 million stock and bond holders as
well as 41 million customers.
Unlike gas, electricity cannot be
effectively stored in large quantities. Thus, plant size was a
function of maximum or peak demand. Despite decentralized
alternatives offered by batteries or self-contained generating
plants that served one or two buildings or perhaps an industrial
complex, the American model was central station generation and
distribution on an increasingly expansive scale. The focus on
central station electric power generation and distribution
derived partly from Edison's vision and partly from Insull's
strategy, which called for encouraging energy use to achieve
greater production capacity and increased revenues, while
passing off savings to the consumer in the form of lower prices
to stimulate even greater consumption.
Edison's system had been based on
direct current (DC), which had a practicable transmission range
of about one mile. From 1880 to 1920, most of the innovations,
including the use of alternating current (AC), were designed to
increase the range, scale, and capacity of the central power
station concept. Indeed, the Niagara project (1895) demonstrated
the possibility of a regional system based on a hydroelectric
generating station, high voltage transmission lines,
substations, and local distribution. Improvement in coal-fired,
steam-powered generators achieved similar increases in capacity.
In the 1920s, inter-connection of generating plants and
distribution systems together with pooling of energy sources
enabled transmission grids to integrate coal- and hydro-powered
generating plants into an expansive distribution system that
served a diverse range of demands.
Interior electric illumination in
the 1880s was initially a luxury for the average consumer. It
was introduced first into commercial establishments, like
theaters and department stores, as well as into affluent
residences. Electricity was first adopted by industry in small,
labor-intensive and new industries, which took advantage of its
fractional attributes -- meaning that the same system could
support small machines, which used motors of less than 1
horsepower, and larger ones, such as motors of 1 to 10
horsepower. Central power station delivery allowed them to pay
only for what they consumed and did not have to meet the
relatively high threshold cost of installing and maintaining a
self-contained power source, like a steam engine or an
independent electric power plant nor find a means of exhausting
the generated heat. Electricity was subsequently adopted by the
large scale, heat-intensive industries, such metallurgy or food
processing, in which the thermal properties possessed value for
the industrial process. Electrification of industry led to
substantial re-engineering of the industrial plant to achieve
ancillary benefits in the form of more efficient uses of space
as well as unit drive systems (i.e., one energy source per
machine).
The 1920s were the era in which
electricity permeated the home. By then, occupants of cities and
burgeoning suburbs had access to multiple energy technologies.
Although electricity continued to be most intensively used by
the affluent, the presence of interproduct competition from gas
and oil meant that prices for electricity tended to stay low.
Falling prices, increased wages, and the decrease in the number
of servants willing to staff middle and upper-middle class
households fundamentally increased the material standard of
living for the working class, while increasing the burden of
housework for many women. With improvements in several household
energy systems, which brought about gas and electric ranges, hot
water heaters, irons, vacuum cleaners and refrigerators,
Americans began to enjoy and to expect a cleaner personal and
environmental standard. Laundry, which in an earlier time might
have been sent out or assigned to a laundress who came in once a
week, now became a routine household chore for the lady of the
house.
From Edison's lab in New Jersey to
John Ryan's copper mines in Montana, electrification was largely
a private sector phenomenon. Cities, of course, were among the
earlier consumers, and municipal regulation was a constant from
the 1880s onward. From experience with both water and gas, which
predated the Civil War (1861-1865), it was obvious that
municipal franchises, which implied a degree of regulation,
would be necessary to obtain access to rights-of-way within
which to construct the conduits. State regulation of electric
utilities was instituted in 1887 in Massachusetts, and state
regulation, exercised through setting rates, has remained the
dominant form of public oversight.
For the most part, industry
executives pursued a cooperative policy toward state regulatory
agencies, with the savings they achieved through improved
technology passed along to consumers in the form of lower rates.
Interproduct competition from gas and oil for heat (if not for
interior illumination) as well as the specter of public
regulation or even public acquisition became powerful incentives
for cooperation with regulatory agencies as well as for price
discipline by the utility companies themselves. Regulation
tended to manifest itself primarily through setting rates, and
the rate structure itself became a marketing tool, designed to
attract large, industrial users who might otherwise have
installed self-contained, independent plants which potentially
competed with central station power. Although residential
consumers paid more per unit of power on average than large
industrial consumers did, and, indeed, generated more profitable
revenues for the power companies, stable or falling prices
relative to higher wages, particularly in the 1920s, muffled
consumer discontent.
Federal New Deal programs were
aimed toward dismantling holding companies and limiting
interstate operation of electric holding companies. Regulation
was believed justified in order to protect the public from
widely perceived abuses. It is unclear how successful this
regulatory function has been, based on studies of consumer
prices and the extent to which early regulatory agencies in fact
protected power companies from competition. It is, however,
evident that federal intervention, in particular, was
instrumental in expanding electric power to underserved,
predominantly rural populations through the REA and other New
Deal and Truman-era programs.
Amy Friedlander
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