Southern Indiana Gas and Electric Company History

Address:

20 Northwest Fourth Street
Evansville, Indiana 47741
U.S.A.

Telephone: (812) 424-6411
Fax: (812) 464-4554

Public Company
Incorporated: 1912 as Public Utilities Company
Employees: 5,500
Sales: $234 million
Stock Exchanges: New York
SICs: 4931 Electric & Other Services Combined

Company History:

Southern Indiana Gas and Electric Company (SIGECO) is an electric and gas utility company serving the southwest portion of the state of Indiana. In 1995 the utility was providing electricity to about 120,000 electricity customers and about 100,000 gas customers. It was also operating nonregulated businesses related to real estate, facility design, and alternative energy products. SIGECO is distinguished as a low-cost supplier of power in comparison to other U.S. utility companies.

SIGECO was founded in 1912 by the merger of three southwestern Indiana energy companies: Evansville Gas Light Company; Brush Light and Power Company; and Evansville Public Service Company. Those companies had been serving southwest Indiana since before the Civil War. Evansville Gas Light Company, in fact, was formed in 1852 by several businessmen, in the southwestern Indiana city of Evansville, who organized the company to light stores and streets in the downtown area. The company started out extracting and refining a gaseous by-product of coal combustion, and then delivering the fumes to gas-burning street and store lamps. The venture's innovative system soon gained widespread acceptance and new gas manufacturing facilities were constructed to serve a broader area. The Evansville Journal during the 1950s described the gas manufacturing facilities as "on a slightly larger scale than those of Cleveland, Ohio."

Evansville Gas Light Company illuminated the streets of Evansville for 30 years before electricity emerged as a commercially viable lighting and energy source in the area. In 1882, the Brush Light and Power Company began lighting streets electrically in Evansville. One year later, Brush Light and Evansville Gas joined forced to create the Evansville Gas and Electric Light Company. Evansville Gas brought 30 years of experience in Evansville to the table, while Brush Light boasted expertise related to the energy supply of the future. The new company expanded rapidly during the late 1880s and 1890s, supplying gas and electricity to light streets and buildings, power factories, and even energize homes. Indeed, an increasing number of homes near the turn of the century were enjoying the benefits of electricity. The typical household still used coal for heating and cooking, and ice for refrigeration. But many homes also had a few electric incandescent bulbs for reading and, in some cases, an electric iron to help with the laundry.

Evansville prospered around the turn of the century. Because of its convenient location on the Ohio River, the town had long served as an important regional hub of commerce. During the late 1800s and early 1900, moreover, the city evolved into a hearty manufacturing town. Evansville's population more than doubled in just more than ten years during the height of its growth. At the same time, new uses for gas and electricity proliferated. By the early 1900s, gas and electricity was being used for thousands of industrial, commercial, institutional, and consumer applications.

Spiraling power consumption led to the emergence of the third energy start-up in Evansville in 1909--Evansville Public Service Company. Although that company initially promised to bring much-needed competition to the local gas and electricity market, it soon became apparent that the two companies would be providing overlapping infrastructure and services. To achieve economies of scale, Evansville Public Service merged with Evansville Gas and Electric Light in 1912 to form Public Utilities, a holding company developed to buy the outstanding stock of both companies. C.B Cobb was named as the company's first president. Simultaneously, the new holding company purchased Southern Indiana Traction Company, a local transportation utility; it wasn't until 1920 that the organization's name was changed to the more appropriate Southern Indiana Gas and Electric Company. Also in 1912, a fire destroyed the utility's downtown Evansville offices, which were quickly rebuilt.

SIGECO expanded at a rampant clip during the 1910s and 1920s by purchasing other utility companies in the southwest Indiana area. As demand for electricity and gas escalated, the company's facilities, sales, and profits surged. At the same time, economies of scale and new generation and distribution technology allowed the company to reduce its rates. Between 1916 and 1926, for example, SIGECO's electricity sales more than doubled while both gas and electricity prices dropped more than ten percent. As noted in company annals, Edison's prophecy that one day only the rich would burn candles was becoming true. Not only had it become more expensive to burn candles for light than to use electricity, but consumers were discovering that they could heat their homes, cook, and run new appliances with electricity and gas.

The 1930s became known as the "golden age" of the gas and electricity industry in southwest Indiana. During that period, demand for power from the industrial sector rocketed. Industrial growth, in fact, was a welcome reprieve to a woodworking region that had nearly depleted its rich forests. Factories sprang up in the region that were producing automobiles and vehicle parts, industrial equipment, and heavy appliances. Besides increased demand for electricity from the companies building those products, the consumers of many of those goods demanded more power to run them. The result was that demand for electricity in southwestern Indiana was doubling every ten to 12 years during the late 1920s and 1930s, despite the Great Depression.

SIGECO scrambled during the 1930s to build new infrastructure to keep pace with racing demand. As the Depression wore on, the utility invested millions of dollars in new facilities and equipment. The heart of its system became the giant Ohio River Station generation plant, which was built during the mid-1920s and expanded throughout the 1930s. Hundreds of miles of new above-ground power lines, supported by tall pine poles, were strung throughout the cities and countryside. Likewise, miles of underground natural gas pipelines were laid with the help of new gas-powered heavy equipment. SIGECO's expansion was made possible by its conversion from horse-drawn wagons to gas-powered trucks. Those trucks were instrumental in building and repairing the infrastructure that allowed SIGECO to generate and deliver gas and electricity throughout Evansville and surrounding areas during the 1930s and 1940s.

SIGECO and the Evansville area suffered a major setback in 1937 that temporarily squelched the company's ambitious growth plans. A record-breaking flood inundated the region, wreaking about $17 million in property damage and flooding out about one-third of the homes in Evansville. Despite the flooding, SIGECO managed to continue supplying electricity to many of its customers from the Ohio River Station. As recorded in company annals, the January 28 Evansville Courier wrote of SIGECO's efforts: "in this period of stress and strain let us remember that our light and power service is not being maintained without heroic action. Some 60 workers are virtually entombed at the utility plant where they fight 24 hours in the day to maintain service. Food and water get to them by boat through window tops. Workers dig coal from underwater pits to keep up this power."

SIGECO recovered from the 1937 flood and enjoyed steady demand growth during the 1940s, particularly given a population surge in Evansville during this time, upon the establishment of an important shipbuilding enterprise for the war effort. Growth was also strong following World War II, when the postwar economic and population boom resulted in a rapid escalation of power consumption. In fact, it became clear during the early 1950s that SIGECO might have trouble meeting the demand for natural gas. The problem was that its main gas works, which had been the key gas production and supply facility for years, had become obsolete. To solve the problem, SIGECO invested heavily to add underground gas storage facilities to feed its main pipeline system, and closed the original gas works. That effort had the added benefit of allowing SIGECO to purchase surplus gas when prices were low. At the same time, SIGECO recognized that it needed to augment its electricity generating facilities. The company again added to the Ohio River Station, among other moves, and built a new plant called the Culley Station.

By the 1960s SIGECO had established itself as a key supplier of gas and electricity to Evansville and surrounding southwest Indiana areas. The company benefited from generally positive industry trends throughout the 1950s and 1960s, in fact, that created a boon for the electricity industry. SIGECO's growth during that period and into the 1970s was typical of many other power companies that vastly expanded their infrastructure and increased sales to meet surging demand. Unfortunately, the power industry experienced turbulence beginning in the 1970s. Efforts by the Organization of Petroleum Exporting Countries (OPEC) shocked the United States into the reality that natural energy sources were not unlimited. SIGECO, like other power companies at the time, was forced to change its mindset. Conservation became key, as reflected in the company's consumer education initiatives and efforts to increase the energy efficiency of its end users.

SIGECO was also influenced during the 1970s by new environmental laws. Legislation that proliferated during that period effectively forced the company to revamp its facilities to generate less pollution. Those costs, combined with increased fuel prices, caused energy prices to rise. SIGECO, however, was sheltered from most negative effects by its status as a government-regulated utility. Still, its rates increased, spelling an end to the rapid demand growth that the company experienced during the 1950s, 1960s, and early 1970s. Despite comparatively sluggish demand growth, SIGECO managed to post revenue and profit gains during the late 1970s and early 1980s. Revenues surged from $94 million in 1977 to $118 million in 1979, and then to $154 million in 1980 as OPEC influences eased. Meanwhile, net income bounced from about $15 million to $21 million and the company's customer base rose to about 163,000.

During the 1980s SIGECO benefited from reduced energy prices and moderate demand growth. The company also expanded by acquiring other companies, thus broadening its customer base throughout southwest Indiana. By 1987, SIGECO's potential customer base encompassed a 2,250-square mile area with a population of about 350,000 people in 74 cities and communities. SIGECO was supplying electricity to more than 110,000 customers, including nonresidential users, and was selling gas to about 68,000 customers in 40 communities. In 1988, SIGECO purchased the service territory of Hoosier Gas Corporation, which boosted its gas customer base to more than 90,000. As a result of that and other acquisitions, SIGECO's revenues surpassed $230 million in the late 1980s, up from about $190 million in the mid-1980s. The late 1980s were also marked by the retirement of Alva Bertrand Brown, who had served as chairman of the board and/or chief executive officer for 35 years, presiding over much of the company's growth.

SIGECO, like other government-regulated utilities, maintained a relatively stable course during the late 1980s and early 1990s. Sales hovered around $230 million, while profits grew from around $30 million in the late 1980s to more than $35 million annually during the early 1990s. The profit gain was partially attributable to SIGECO's cost-cutting and efficiency initiatives, which earned the company recognition as a low-cost leader in the utility industry. Indeed, going into the mid-1990s SIGECO was ranked in the bottom 12 percent of all U.S. utility companies for operating costs as a percentage of sales, and it charged among the lowest rates for electricity and natural gas in the nation. It was also among the top in the industry in terms of customer satisfaction. Among other miscellaneous credits, SIGECO maintained a cutting-edge fleet of vehicles that used compressed natural gas as fuel and was also helping to convert many area school buses to compressed natural gas.

By 1994 SIGECO was serving more than 120,000 electricity customers and more than 100,000 natural gas consumers. 1994 sales reached a recorded $261 million as net income surpassed $41 million. By that time, SIGECO was employing a work force of 5,500 people throughout southwest Indiana. Under the leadership of Ronald G. Reherman, the company continued to boast a healthy balance sheet and to cement its status as a low-cost provider of gas and electricity in comparison to other U.S. utilities.

In addition to its core utility operations, which were facing increasing competition from alternative providers, SIGECO began a push during the early 1990s to diversify into nonregulated businesses. To that end, the company established three subsidiaries: Southern Indiana Properties, Inc., a real estate division created in 1985; Southern Indiana Minerals, Inc., a division created in 1994 to market coal combustion by-products; and Energy Systems Group, Inc., which was incorporated in 1994 to design and recommend building upgrades that would pay for themselves through lower energy consumption. Gains from those subsidiaries, combined with healthy regional growth and positive returns from SIGECO's long-standing gas and electricity operations, suggested ongoing success for the 83-year-old utility in 1995.

Principal Subsidiaries: Southern Indiana Properties, Inc.; Southern Indiana Minerals, Inc.; Energy Systems Group, Inc.

Southern Indiana Gas and Electric Company History

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