Atlanta Gas Light Company History

Address:

303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3251
U.S.A.

Telephone: (404) 584-4000
Fax: (404) 584-3709

Wholly Owned Subsidiary of AGL Resources Inc.
Incorporated: 1856
Employees: 2,986
Sales: $1.28 billion (1997; combined for AGL Resources Inc.)
SICs: 4924 Natural Gas Distribution

Company History:

Atlanta Gas Light Company is the southeastern United States' largest natural gas distribution company. It serves more than 1.3 million customers in 229 Georgia communities and more than 51,000 customers in Chattanooga and Cleveland, Tennessee. Its predominant business is gas distribution, but the company also has several diversified operations. In 1996, the company was restructured such that it became the principal subsidiary of a new holding company, AGL Resources Services Company, which also oversaw the operations of the newly formed AGL Investments, Inc., The Energy Spring, Inc., and AGL Energy Services, Inc.

Mid-19th-Century Origins

Atlanta Gas Light got its start in 1855 when William Helme, an enterprising Philadelphian who had already built several gas retorts, persuaded the Atlanta City Council and several influential Atlanta citizens to invest in a private corporation to build a street-lighting system for the city. Helme built his gas plant and laid three miles of main, and by the end of 1855 gas lamps could be seen on the city's streets. Julius Hayden became the company's first president, and gas lights rapidly became popular in Atlanta homes and businesses. City officials were happy with their investment, because stock dividends were paying the city's entire street lighting bill. Five years later, when the Civil War broke out, stock held by northern investors, including Helme, was declared "alien" and sold to the highest bidder. As the war progressed, coal, and therefore gas, grew short. When General Sherman took the city, the gasworks was burned to the ground.

After the war, the company reconstituted and elected former Atlanta Intelligencer editor John W. Duncan president. Duncan issued bonds and completed massive repairs that culminated on September 15, 1866, when the gas plant went back into service.

In the late 1860s, Atlanta was rebuilt. Northerners flowed south and the city began to grow. By the early 1870s Hayden, who had returned to the presidency after Duncan's death in 1869, was expanding service and adding to gas-producing capacity. Hayden's relationship with the city council, populated by members of the company's board, was at times antagonistic. The council even threatened to grant another company a franchise.

In 1873 a panic hit the stock market. During the depression that followed, Hayden was forced to repeatedly lower residential and street-lighting rates. Meanwhile, the city council turned off street lights to cut costs and asked the gas company rather than the police department to light and extinguish lamps. The former action caused a public outcry, while the latter did not result in expected savings.

The Healey Years, 1877-97

In 1877 brick manufacturer and construction executive Thomas G. Healey became gas company president. His term was marked by several momentous changes. In 1884 the Gate City Company erected the Gate City Gas Works and began advertising for customers, claiming its "water gas" was better than Atlanta Gas Light's "coal gas." Healey in turn slashed rates and appealed to Atlantans' loyalty. Within a year the price of a thousand cubic feet of gas fell from $2.40 to $1.00.

In 1887 Atlanta, which had profited greatly from its one-third ownership of the company, sold its shares to raise funds for the Georgia Institute of Technology. The following year the city council resolved to replace gas and gasoline lights with incandescent electric lights. Healey, who was doing a far greater business with private individuals and firms, responded to the incursion of the electric light by introducing the recently invented Welsbach Mantle, a cone of incombustible minerals that considerably brightened the relatively dim gas light.

On April 13, 1889, the United Gas Improvement Company (UGI), which months previously had bought the Gate City Gas Works, announced it had gained control of Atlanta Gas Light. Healey remained as president, and Atlanta Gas Light continued to grow and prosper.

Healey and John H. Mecaslin, who replaced him as president in 1897, surmised that electric light would eventually replace the gas light, so throughout the 1890s they worked to introduce the gas stove. But Atlantans stuck to their coal stoves despite offers of completely installed gas stoves for as little as ten dollars. Not until the anthracite coal strike of 1902, when coal could not be bought at any price, did large numbers of customers switch to gas cookstoves, which eventually became a bigger business than gas lighting had ever been. In mid-1903, after the great switch-over, the company had 122 miles of mains, 11,000 customers, and an average daily send-out of 1.6 million cubic feet.

Decades of Changes, 1900s-20s

In July of that year Georgia Railway and Electric Company (GR&E), a trust that had already consolidated Atlanta's steam, street railway, and electric light and power operations, gained control of Atlanta Gas Light. GR&E president Preston Arkwright became the de facto head of Atlanta Gas Light and in 1904, W. L. Cosgrove was named company president. This new company was extremely unpopular because of its "foreign" ownership. The Hearst-owned newspaper, the Georgian, and politicians such as James L. Key, soon began calling for municipal ownership.

The rhetoric of Key and others did little to modify the behavior of Arkwright, who appointed customer-oriented R. C. Congdon manager but continued to manipulate Atlanta Gas Light. In 1912, he and his associates reorganized their Georgia holdings to better exploit their capital-raising potential. They consolidated various hydroelectric projects under a new company called Georgia Railway and Power (GR&P) which in turn guaranteed itself the Atlanta market, and therefore access to capital, by leasing the properties of GR&E.

When, during World War I, coal quality diminished and the government demanded that gas companies extract Tulol from gas for TNT manufacture, Arkwright claimed he could do nothing about the high-priced, low-BTU product that resulted. Nevertheless, when the Railroad Commission ordered the company to buy better gas, quality increased.

After the war Arkwright asked for, and got, three rate increases between 1918 and 1920. This incited protests from the Georgian and from Key, who by then was mayor. This situation reversed itself in the deflationary early 1920s, when the commission ordered two rate reductions, the second of which Arkwright fought all the way to the Supreme Court.

Ownership of Atlanta Gas Light changed hands several times in the second half of the 1920s. In April 1926 GR&P became the property of Southeastern Power and Light Company. In a series of mergers, Southeastern combined its extensive Georgia utility holdings into a new company called Georgia Power. Finally, in May 1929, Georgia Power sold Atlanta Gas Light to Central Public Service Corporation of Chicago.

Central Public Service Corporation President A. E. Pierce became the president of Atlanta Gas Light. M. L. Kane, who formerly managed Georgia Power's "gas department," became Atlanta Gas Light's manager.

Other changes followed. In 1928 Southern Natural Gas of Birmingham announced plans to build a natural gas pipeline from Louisiana to Atlanta and offer higher BTU natural gas at lower prices than Atlanta Gas Light. Southern's plan might have bankrupted Atlanta Gas Light; however, Pierce went to Atlanta and successfully gained the natural gas franchise on March 29, 1929.

In the months that followed, the company renovated its old gas lines and built new ones to the Southern Natural lines on the outskirts of the city. R. C. Hoffman, Central Public Service's on-site representative, hired a new gas manager and a professional sales manager. His capital budget for 1930 alone was approximately $2 million.

The excitement and activity which went along with the changeover stimulated business. In 1929 the company sent out a total of 200 million cubic feet of 550 BTU manufactured gas. In 1930 it sent out 274 million cubic feet of 1000 BTU natural gas. In equivalent BTUs, the 1930 send-out doubled that of 1929.

In the midst of this huge expansion, the Depression hit. At first the slowdown seemed to have little effect. In 1930 the customer count rose 15 percent to 49,238, but then customer rolls fell to 47,583 and 46,089 in 1931 and 1932, respectively. The Depression had a larger effect on Central Public Service, which to shore up its finances sold worthless stock and for accounting purposes shifted Atlanta Gas Light first to its United States Electric and Gas Company subsidiary and then to its New York-based Consolidated Electric and Gas subsidiary.

In January 1935, W. W. Winter, a Central Public Service vice-president, became president of Atlanta Gas Light. Winter supervised several mid-1930s gains in business. He formed crews of "House Warmers" who went door-to-door selling gas radiators, and he convinced factories that higher-BTU natural gas was a good source of energy. While Winter struggled to keep Atlanta Gas Light growing, Congress was passing the Public Utilities Holding Company Act of 1935 (PUHCA), which prohibited holding companies from owning more than one integrated utility system. PUHCA ultimately gave Atlanta Gas Light its independence and initially led Consolidated Electric & Gas to merge its diverse Georgia holdings in preparation for divestiture.

The Era of Mergers, 1930s-40s

On July 1, 1937, H. Carl Wolf, who became president in August 1938, supervised a merger with the Georgia Natural Gas Corporation. Then, on March 1, 1941, Consolidated Electric and Gas merged its remaining Georgia gas companies--Georgia Public Utilities Company and Macon Gas Company--into Atlanta Gas Light. After this transaction, Atlanta Gas Light served 102,859 customers and 28 cities and towns, including two in South Carolina.

Final divestiture was delayed by World War II, which also caused labor shortages at the company. After the war, Central Public Service attempted to satisfy the Act's requirements by selling Atlanta Gas Light to Southern Natural Gas. This transaction was canceled when Georgia regulators informed the Securities and Exchange Commission (SEC) that Southern Natural might be controlled by the same people who controlled Central Public Service.

Finally, on November 1, 1947, after 58 years of holding company control, Atlanta Gas Light once again became an independent, investor-owned utility. Under the SEC-approved plan, Atlanta Gas Light was spun off to Consolidated Electric & Gas's preferred shareholders. At its independence Atlanta Gas Light served 33 incorporated cities, and had net earnings of $1.5 million and $14 million in revenues.

In the postwar period, the Georgia economy boomed and gas-powered appliances sold briskly. Atlanta Gas Light extended service, adding towns and signing up more than 35,000 new customers in 1949 and 1950. Rock Granite Tabor, who became company president in 1945, responded to increased demand by converting the remaining coal gas facilities to higher BTU water gas; building peak-shaving facilities to add propane to the gas flow when supplies grew short; signing contracts to increase the amount of gas the company obtained from Southern Natural Gas; and bringing a second pipeline supplier, Transcontinental Gas Pipeline Corporation, to Georgia.

The new pipelines allowed the company to offer natural gas in areas previously served by manufactured gas. Demand continued to increase, and in 1957 Tabor built a new peak-shaving facility in rural Riverdale. He soon added other peak-shaving facilities, and by the end of 1957 the customer count reached 322,000.

Expansion and Industry Shortages, the Lee Tenure: 1960-76

In February 1960 Tabor was succeeded by Duncan A. Crawford, a longtime Atlanta Gas Light vice-president and former employee of Stone & Webster, a consulting firm which the company often relied on for management expertise. Crawford served for less than a year before retiring; he was replaced by Wallace L. Lee, a trained engineer and the first native Georgian ever to head Atlanta Gas Light.

Lee was a dynamo of an executive. He soon reorganized and energized the sales department, wrote new, customer-friendly main and service line extension rules, began selling gas lights, retained an advertising agency, and announced plans to build a 150-mile pipeline that ultimately brought natural gas to 37 previously unserved southeast Georgia communities. Lee's aggressive style was suited to a time when the electric industry was using hardball tactics to promote the all-electric home. He sold new gas-powered appliances such as air conditioners, and through a builder consultant sales force he persuaded builders to outfit new homes with gas. He successfully fought a Southern Natural rate increase and cut residential rates. Finally, in a controversial move, he sought to sidestep rural Georgia's anti-Atlanta bias by establishing the Georgia Natural Gas trade name for gas sold outside Atlanta.

Throughout the 1960s Lee continued to expand service, in 1964 acquiring the Mid-Georgia and Georgia Natural Gas Companies. With more than 460,000 customers by 1965, Lee further broadened Atlanta Gas Light's base in 1966 by merging with Savannah Gas Company, the oldest gas system in the state. Between 1965 and 1970 the company gained more than 100,000 new customers.

The company's growth was interrupted by the gas shortage of the 1970s, which drove up prices and squeezed company finances. The public utility commission allowed the company to pass along wholesale prices but not the cost of inflation. As a result, earnings fell from $1.61 per share in 1969 to $1.01 in 1970, and were continually pressured, even though the company was granted rate relief four times over the decade.

Lee cut costs and charged for service calls. He expanded and built peak-shaving facilities, constructed a liquefied natural gas facility in Riverdale, called for new exploration, and encouraged consumers to conserve gas. Despite these measures, the supply situation was far from remedied in February 1976, when Joe T. LaBoon succeeded Lee as president. The winter of 1976-77, one of the coldest on record, put extraordinary demands on the company. Reserves grew short, and the company had to cut off industrial users in order not to interrupt residential service.

The Rise and Decline of Prices, Late 1970s-80s

In the late 1970s, supply problems began to ease, and Atlanta Gas Light again began to grow. Unfortunately, skyrocketing prices were one of the side effects of the Natural Gas Policy Act of 1978, which began the deregulation of gas prices at the wellhead and led to a glut in the market. In the five years following the Act's passage, prices increased 159 percent. For the first time gas, long the cheapest fuel, faced price competition from No. 6 fuel oil in industrial markets. Even so, by the end of the decade Atlanta Gas Light had 800,000 customers in more than 200 cities and towns. Following the complete deregulation of natural gas prices at the wellhead in 1985, the company's customers enjoyed a lengthy decline in gas prices. Prices were lower in 1992 than in 1984--even with no adjustment for inflation.

LaBoon, who became CEO in 1980 and chairman in 1985, emphasized service and friendliness. He also initiated an energy assistance program for low-income customers. Still, because the low cost of gas was no longer its biggest selling point, financial pressures continued. The recession of 1982-83 increased the company's difficulties and, despite successive rate increases, brought into question its ability to pay its dividends.

In 1984 the company's financial situation improved along with the Atlanta economy. Prices settled and LaBoon reorganized the company to better supervise its burgeoning nonutility operations. By 1986, David R. Jones--who succeeded LaBoon as president in 1985--could count one million customers on Atlanta Gas Light's rolls.

In the late 1980s, Atlanta Gas Light worked to keep up with Georgia's rapidly expanding economy and population. It came to a regulatory agreement that took into account how changes in weather patterns could affect the company's bottom line. In 1988 it acquired the Chattanooga Gas Light Company, expanding its services into southern Tennessee. Jones, like other natural gas distributors, in the early 1990s promoted natural gas as an environmentally sound source of clean energy for homes and for such new uses as natural gas vehicles.

Despite the regulatory agreement, which helped to even out receipts in unseasonably warm winters such as that of 1988-89, profits at Atlanta Gas Light lagged. Wall Street analysts predicted losses of 35 to 40 cents a share by the end of the 1980s, at a time when the company projected $565 million in capital expenditures over the next five years. Most of that money would be spent on improvements, especially new pipes, along with innovations such as a computerized system for reading meters which would increase meter-reading capacity from 300 a day for a human meter-reader to 3,000 an hour for a computer. The company made such efforts in preparation for the phenomenon of deregulation, soon to hit the gas industry in Georgia.

Opportunity in the Face of Challenge: The 1990s

By 1995, the Atlanta Journal and Constitution was asking its readers, "Now that you've chosen a long-distance telephone carrier, are you ready for dinner-hour calls from natural gas companies trying to sell you cheaper home-heating service? That's not as far-fetched as it may sound." Atlanta Gas Light, as the article reported, was not passively facing the transition "from regulated monopoly to a competitive market." In opposition to a group of large industrial customers called Fair Access to Competition Today (FACT), who demanded across-the-board deregulation, Atlanta Gas Light proposed a "competitive pricing" plan in which it would separately negotiate contracts with each of its large industrial clients. Atlanta Gas Light had already experienced a $4 million loss after its largest customer, Arcadia Corporation, took advantage of deregulation in 1993 to connect its Augusta, Georgia, fertilizer plant to an interstate pipeline, thus bypassing the utility. Hence the company had powerful incentive to face deregulation head-on: among the measures it took was downsizing, reducing some 700 jobs and closing down staffed payment offices.

And yet there was opportunity in the face of challenge, symbolized by the fact that in February 1996, Atlanta Gas Light had a record day of sales, when it used 2.043 billion cubic feet of natural gas during a single 24-hour period. Of more significance was the creation, on March 6, of a new parent corporation, AGL Resources Inc. The latter would operate not only Atlanta Gas Light--which remained regulated for the time being--but also nonregulated, nonutility subsidiaries that included AGL Investments Inc. and AGL Energy Services Inc. Thus the company would be involved in the distribution and delivery of gas through Atlanta Gas Light, as well as the sales and marketing of it through other subsidiaries.

Atlanta Gas Light had a number of public relations opportunities associated with the 1996 Olympic Games in Atlanta. The company supplied two natural gas-powered press trucks to lead the men's and women's marathon races, which were internationally televised to an audience in the billions. It also built and maintained compressed natural gas (CNG) buses for Atlanta's rapid transit system, MARTA, and these too made their debut during the Olympics. AGL predicted that by the year 2000, the city would have some 200 CNG buses in operation. Atlanta Gas Light engineers, working with a team from Georgia Tech, designed the Olympic torch used to light the Olympic Cauldron, which was also designed by company engineers. Later in the year, the company sent its own public relations ambassador, the mascot "Burnie Blue," on a home safety tour throughout the state.

In October 1996, Atlanta Gas Light encountered a minor difficulty due to a Teamsters' strike, but maintained service levels through the use of management and trained employees in the field as replacements for the striking Teamsters. In April 1997, with the enactment of deregulation by the Georgia General Assembly, the company faced competition from some 55 other marketing companies. But as company leadership told the Atlanta Journal and Constitution, deregulation offered plenty of potential. The AGL annual report for 1997 stated that the company expected to see six to seven percent annual growth during the next five years. Expansion would come in areas such as propane distribution, an area in which Jones stated "We'd like to be in the top 10."

Atlanta Gas Light Company History

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