PUBLIC SERVICE COMPANY OF COLORADO History

Company History:

Public Service Company of Colorado (PSCCo.) provides electricity and gas to a territory that includes Denver and other cities as well as rural sections of Colorado. Through its subsidiary, Cheyenne Light, Fuel & Power Co., the utility also serves customers in the environs of Cheyenne, Wyoming. Other subsidiaries of PSCCo. include Fuel Resources Development Co. (Fuelco), which explores for and develops new sources of oil and natural gas, and Westgas, which purchases, transmits, stores, and sells natural gas.

Public Service Company of Colorado traces its roots to 1869, when William N. Byers, owner of the Rocky Mountain News, Colonel James Archer, Walter Scott Cheesman, and five other leading Coloradans gathered in Denver and agreed to finance a local gas lighting company. They incorporated the Denver Gas Company on November 13, 1869. But Archer, who was elected president, neither desired nor could afford to have gas-manufacturing equipment sent west via pack mule. So the company had to wait nearly a year for the completion of the Denver-Pacific and Kansas-Pacific Railroads before it could begin building its system. Construction finally got underway on September 20, 1870; by year's end Archer had laid two miles of mains and built a gas plant on the southwest corner of 18th and Wewatta Streets.

At first, the gas was used exclusively for street lighting. Ladder-carrying lamplighters would ignite the lamps at dusk and extinguish them at dawn. Later, businessmen and homeowners replaced their dim, smoky kerosene lamps with gas lamps, which would not dominate the market for long.

In April 1880 entrepreneurs exhibited the recently invented arc light to an enthusiastic Denver audience. The arc light passed an electric current between positive and negative carbon electrodes and produced a light much brighter than the gas lamps that were then in use. The arc light's potential was soon harnessed by another group of Denver businessmen, including Walter Cheesman, who founded the Colorado Electric Company on February 21, 1881.

That spring, Colorado Electric bought two 35-horsepower, direct-current Brush-Swan dynamos. Then president William J. Barker traveled west to set up a generating station, and within a few months the system was in place. At first only sizable customers like the Daniels and Fisher Department Store had lights permanently installed. Others ordered lights for special occasions. It was quite common for the electric company to furnish temporary wiring, lamps, and batteries for an evening and then retrieve them the next day.

The Colorado Electric Company eventually made some inroads in home lighting and prepared to vie for the Denver street-lighting contract, which would be open to bidding in 1885. Determined to demonstrate the superiority of its product, the company erected its famous 'lighthouses of the plains,' eight iron towers ranging from 150 feet to 210 feet in height and located in strategic positions throughout the city. Each tower carried eight 3,000-candlepower arc lights capable of lighting a large area.

Colorado Electric won the street-lighting contract from the city, but it subsequently faced fierce competition from a variety of new electric companies that were forming to serve Denver's burgeoning population. Neither Colorado Electric nor its competitors could make money in such an environment, even though Denver's population would exceed 100,000 by the end of the decade. Ruinous competition was soon followed by mergers and acquisitions; on May 7, 1889, Colorado Electric and Denver's other remaining electric utilities consolidated as the Denver Consolidated Electric Company.

Denver Gas had nevertheless continued to grow. It introduced the brighter Wellsback light and built a new coal retort house with one million cubic feet of daily capacity. Like Colorado Electric, it faced competition from younger companies and was drawn into mergers. Finally, on October 29, 1891, Denver Gas merged with the United Gas Improvement Association and the People's Gas Light Company to form the Denver Consolidated Gas Company.

Throughout this early era, Denver's booming population and economy had fed the growth of gas and electric companies. Things took a sharp turn for the worse in 1893, when the federal government stopped buying silver. Since Colorado's economic growth had been built on silver mining, prosperity soon turned to depression. During this economic downturn, the two remaining utilities cut their losses and merged as the Denver Gas & Electric Company (DG&E).

Colorado's economy revived at the turn of the century, as irrigation, farming, and gold mining became major industries. Seeing room in the Denver market, entrepreneurs formed the Lacombe Electric Company in April of 1900. Lacombe and Denver Gas & Electric soon entered into a ruinous price war that drove Denver Gas & Electric into receivership in 1902.

DG&E's receiver was a financial wiz named Henry L. Doherty, who in the 1890s had engineered the mergers that formed Denver Gas & Electric. As receiver and later president of the DG&E, he again moved to reshape Denver's utility map. In August 1910 Doherty formed Cities Service Company, under which he created the Denver Gas & Electric Light Company. He then consolidated all of Denver's utilities, including Denver Gas & Electric and Lacombe Electric.

Throughout the 1920s the gas and electric businesses grew steadily. A growing population meant a growing customer base to which the company sold such appliances as electric irons. In the early part of the decade Doherty again reshaped the Colorado utility map. On August 2, 1923, he incorporated Public Service of Colorado in order to build a generating station for Denver and northern Colorado. Two months later he merged Public Service of Colorado with Denver Gas & Electric Light and Western Light and Power. The latter utility had been formed in 1907 as the Northern Colorado Power Company and in 1923 served the coal mines of northern Colorado and the towns of Lafayette, Boulder, Longmont, Loveland, Berthoud, Fort Collins, Greeley, Fort Lupton, Brighton, and Cheyenne, Wyoming.

On September 3, 1924, Doherty merged the Public Service Company of Colorado with the Colorado Power Company, which had been founded as Central Colorado Power in 1906 by Myron T. Herrick. A pioneer in hydroelectric power, Herrick had diverted the Colorado River in 1909, sending it through two and one-third miles of granite to turbines in his company's Shoshone plant. From there he sent transmission lines 150 miles through several forbidding mountain passes to Denver. He also built Barker Dam in Boulder Canyon, a project that took more than 18 months to complete and for which his company had to devise new methods of acetylene welding.

In November 1924 work was completed on Valmont Station, a 20,000-kilowatt, five-story steam-electric generating plant located near the lignite coal fields of northern Colorado. When it went on line in 1924, Valmont Station was one of the largest, most modern powdered-fuel generating stations located between the Missouri River and the Pacific Coast.

While much of its merger and acquisition activity had been concerned with the electric business, PSCCo. had not neglected its gas business. On September 19, 1927, the company won the right to distribute cheaper natural gas in Denver. Shortly thereafter, a subsidiary called Colorado Interstate Gas Company began building a pipeline from the gas fields in the Texas panhandle to Denver. When the pipeline was completed in June 1928, the PSCCo. closed its gas-producing retorts for good.

The natural gas business was also flourishing in other parts of Colorado. Major discoveries in the northern part of the state had led Cities Service to create the Colorado-Wyoming Gas Company on December 1, 1925. In September of 1931, as part of a settlement between Cities Service Company and PSCCo., the Colorado-Wyoming Gas Company became the property of the Public Service Company of Colorado.

By the mid-1930s Cities Service controlled not only the PSCCo. but over 200 electric and oil properties in 33 states as well. Doherty's dominion, however, was not to last much longer. In 1935 Congress passed the Public Utility Holding Company Act (PUHCA), which ordered utility holding companies to divest themselves of all but one integrated utility. The effects of PUHCA were not felt immediately, but on November 29, 1943, a subsidiary of Cities Service sold all of the Public Service Company of Colorado's stock to the public, making PSCCo. a locally owned and operated company.

John E. Loiseau served as the first president of the now independent PSCCo. Loiseau had joined the company in 1923 and had been vice-president since 1938. As president he was immediately challenged by a booming Colorado economy. To meet increased demand for natural gas, Loiseau used a variety of subsidiaries, including the Western Slope Gas Company, to build several new gas transmission lines. To increase the company's output of electricity, he constructed the Arapahoe Station in Denver and added units to Valmont Station and Lacombe Electric's old Zuni Station. Loiseau's biggest project was the Cherokee Steam Electric Generating Station, a four-unit, 780,500 kilowatt plant that first went into operation in 1957 and was completed in 1968.

During the late 1950s and the 1960s, Robert T. Person, who became president on January 1, 1959, also worked to meet increasing customer demand. In April 1959 the company began converting the abandoned Leydon mine into an underground gas storage facility. Gas held in Leydon could supplement gas coming through pipelines during hours of peak demand.

On the electric side, the company began construction of the Cabin Creek Pumped Storage Project in 1964. Finished in 1967, Cabin Creak was designed to pump water up to mountain reservoirs during off hours and then, during the day, allow that water to fall through massive 268,000-kilowatt turbines. As with the Leydon mine, this extra energy would supplement normal capacity during peak hours.

By the end of the 1960s nationwide natural gas reserves were beginning to diminish. Though supply problems did not directly threaten the company's customers, Robert T. Person and other PSCCo. executives felt the company should begin searching for its own sources of fuel. Person assigned exploration responsibilities to the company's pipeline subsidiary, Western Slope Gas. After two years however, he decided that an independent subsidiary would be a better way of structuring exploration efforts. So in December 1970 the company formed Fuelco to secure sources of natural gas, oil, oil shale, sulfur, uranium, and other minerals. Fuelco's goals were later expanded to include all basic energy sources, including geothermal ones.

At the end of the 1960s, PSCCo. was also working to add to its electric generating capacity. Since the early 1950s it had, through various industry groups, been exploring the possibilities of nuclear power. In 1965 it announced its intention to build a high-temperature, gas-cooled reactor near Fort St. Vrain, a site that had been a major fur trading post in the 1840s. Construction of the 330,000-kilowatt facility was begun in September 1968, and in December 1973 the U.S. Atomic Energy Commission granted it a full-power operating license.

Fort St. Vrain was the only gas-cooled commercial reactor ever to be built in the United States. Its design was considered inherently safer than that of conventional nuclear generators. In practice, though, the plant was plagued by a variety of small problems. Between 1973 and 1979 it went through an extensive and frustrating test period, in which it never achieved more than 70 percent of contracted capacity. Finally, in June 1979, PSCCo. announced that it had accepted the troubled plant on the condition that the manufacturer, General Atomic Co., would return $60 million for delivering the facility under its rated power, contribute $97 million toward the construction of a new power plant, and furnish without charge enough fuel to operate the Fort St. Vrain facility through 1984.

Even if Fort St. Vrain had gone on line at full power, its contribution would not have met the growing demand of Denver, which was rapidly becoming the Rocky Mountain region's center for energy exploration activities. To meet this demand, in the late 1970s the company began building Pawnee Electric Generating Station, a massive coal-fired, 500-megawatt plant located 90 miles northeast of Denver in Brush, Colorado.

Financing Pawnee was difficult, especially with Fort St. Vrain's problems and inadequate rate relief. In 1980 PSCCo.'s chief financial officer, James N. Bumpus, told the New York Society of Security Analysts: 'The half billion dollar expenditure on the Pawnee Plant came perilously close to bringing this company to its knees in early 1980. Only drastic construction cutbacks coupled with timely rate relief have made it possible.'

Finishing Pawnee in 1981 solved some of the company's electrical supply problems. However, many obstacles remained at Fort St. Vrain. In 1980 the first of a series of 'minor' radioactivity releases occurred there. These emissions were followed by shut downs and reopenings, which usually began with a period of low-power tests. The plant's major problem was the presence of moisture in the helium gas used to cool the facility. According to Wall Street Journal correspondent Michael Totty, 'the glitch [caused] repeated shutdowns because even a thimbleful of water ... prevents [the reactor] from operating at power levels necessary to generate electricity.'

In October 1986, after Fort St. Vrain was idle for all but six weeks in the previous 31 months, PSCCo. executives wrote off nearly all of the company's $223.5 million Fort St. Vrain investment. Since the write-off also covered further losses, including the cost of mothballing the plant and removing it from the rate base, many analysts predicted the facility would soon be closed for good. Chief executive officer Richard Walker disagreed and predicted it would reopen the following spring. He commented in the Wall Street Journal, 'Everything we've done gives me confidence we'll be able to come up to power and operate economically.'

Indeed Fort St. Vrain was reopened on April 21, 1987. Its operation, however, continued to be troubled. In December 1988 PSCCo. announced that the plant would close for good in June 1990. In an article that carried the company's announcement, New York Times writer Matthew L. Wald noted that the plant had 'produced about 14 percent of the electricity it would have if it ran at full power round-the-clock' and that it ranked 'last in performance among the 109 nuclear power plants with operating licenses.'

Fort St. Vrain did not last until June 1990. Sighting the financial impact of an anticipated lengthy outage associated with continuing problems, PSCCo. ended the facility's electric production in August of 1989.

An independent company since 1943, Public Service Company of Colorado has worked since its formation to meet ever-increasing demand from a rapidly growing customer base. Its forays into nuclear technology--which began in the 1960s--resulted in the Fort St. Vrain plant, which rarely operated and eventually had to be closed. In July 1990 chief executive officer Delwin D. Hock selected a team of executives from Westinghouse Electric Corp., Morrison Knudsen Corp., and Black & Veach to negotiate a $200 million contract for the decommissioning and conversion of Fort St. Vrain into a 330-megawatt gas-fired facility.

Principal Subsidiaries: Cheyenne Light Fuel & Power Co.; Green & Clear Lakes Co.; Western Gas Supply Co.; 1480 Welton, Inc.; Fuel Resources Development Co.; Bannock Center Corp.; PSR Investments Inc.; PS Colorado Credit Corp.; Natural Fuels Corp (79%).

Further Reading:

• Public Service Company of Colorado: Providing Energy for More Than a Century, Denver, Public Service Company of Colorado, c. 1975.
• Totty, Michael, 'PS Colorado Nuclear Plant Woes Persist,' Wall Street Journal, November 11, 1986.
• 'Public Service Company of Colorado,' Wall Street Transcript, October 12, 1981.
• Wald, Matthew L., 'Safest Reactor Is Closing Because It Rarely Runs,' New York Times, December 8, 1988.

Source: International Directory of Company Histories, Vol. 6. St. James Press, 1992.

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