Canadian Utilities Limited History

Address:

1500, 909 11th Avenue South West
Calgary, Alberta T2R 1N6
Canada

Telephone: (403) 292-7500
Fax: (403) 292-7532

Public Subsidiary of ATCO Ltd.
Incorporated: 1911 as the Canadian Western Natural Gas, Light, Heat, and Power Company Limited
Employees: 5,000
Sales: $2.97 billion (2002)
Stock Exchanges: Montreal Toronto
Ticker Symbol: CU
NAIC: 221122 Electric Power Distribution; 486210 Pipeline Transportation of Natural Gas; 221112 Fossil Fuel Electric Power Generation; 211112 Natural Gas Liquid Extraction

Company Perspectives:

Canadian Utilities Limited (CU) is Alberta-based with a worldwide organization of innovative companies all belonging to and contributing significantly to the strength of the ATCO Group. Operating businesses in Power Generation, Utilities, Logistics & Energy Services and Technologies have evolved over a long history of service and performance. Our continued commitment to excellence in customer service and technology, combined with the dedication of more than 5,000 employees who span the continents, has allowed CU to become an industry leader in Alberta and around the world.

Key Dates:

1911:: Canadian Western Natural Gas, Light, Heat, and Power Company Limited is founded by Eugene Coste.
1925:: Canadian Western becomes a sister company to Edmonton-based Northwestern Utilities Limited under International Utilities Corporation, a U.S.-based holding company.
1930:: The network of Canadian Utilities companies is purchased by the Dominion Gas and Electric Company, a subsidiary of the American Commonwealths Power Corporation.
1944:: Dominion Gas and Electric Company merges with the International Utilities Company.
1961:: International Utilities, the corporate owner of the three linked Alberta companies, also purchases Northland Utilities, Limited.
1980:: Majority ownership of Canadian Utilities (CU) is transferred from International Utilities to ATCO Ltd., a Canadian-based conglomerate.
1999:: CU moves to separate its regulated utility businesses from its non-regulated businesses, forming a new subsidiary, known as CU Inc., to acquire all of the common shares and debt of its regulated subsidiaries.

Company History:

Company Origins: 1900-25

The earliest enterprise of Canadian Utilities Limited was Canadian Western Natural Gas Company, Ltd., which was founded in the early 1900s by geological engineer Eugene Coste. According to company historian Len Stahl, Coste had become known as "the father of the natural gas industry in Canada, having ... brought in the first commercial discovery of natural gas in Ontario in 1889." While employed by the Canadian Pacific Railway (CPR) in 1909, Coste discovered a large natural gas reserve on a bank of the South Saskatchewan River in southern Alberta. He acquired rights to this field, dubbed Bow Island field, from the CPR and then went to England to raise capital, selling $4.5 million worth of stock slated for building a pipeline from the Bow Island site to the cities of Calgary and Lethbridge.

On July 19, 1911, Coste incorporated his company under the name Canadian Western Natural Gas, Light, Heat, and Power Company Limited. In addition to planning the construction of the Bow Island pipeline, the company acquired two established Calgary franchises: a coal gas plant consisting of 30 miles of pipe serving 2,200 customers and a pipeline serving about 50 customers, including the Calgary Brewing & Malting Company. On April 12, 1912, the company began construction of its 170-mile Bow Island pipeline. Eighty-six days later, the completed pipeline was the third largest gas pipeline in North America and the most northerly gas transmission line in the world.

Although the public initially greeted the transition from coal to gas fuel with some skepticism, residents of Lethbridge began using Canadian Western gas for lighting purposes by the fall of 1912, and thereafter the demand for gas increased dramatically. Soon the nearby towns of Nanton, Okotoks, and Brooks were linked to the system, and in 1913 Fort Macleod, Granum, and Claresholm also gained the option of gas lighting. Over the year, Canadian Western gained a client base of 3,400, whom it served from 20 wells yielding gas in the Bow Island field. By 1914 Canadian Western's revenues topped $1 million.

Although the years immediately following its establishment presented some challenges for the company, Canadian Western continued to gain customers. The company suffered a temporary setback in 1915, when torrential rainfall wiped out its main pipeline to Calgary. The city was without gas service for two days while the company's repair crew worked to get supplies and repair the break in the face of severe weather conditions that had washed out railroad tracks and bridges. This time also marked the beginning of a legal dispute between the company and the city of Calgary, whose officials maintained that the company's franchise did not cover the entire city of Calgary. Canadian Western prevailed in 1917, when the Supreme Court of Alberta ruled that it did have the right to provide gas to all parts of the city.

By 1920, supplies of gas in Canadian Western's Bow Island field had begun to wane. Because of the shortage of gas, the company was forced to limit its service to some industrial customers, in order to supply residential sites. Operators at regulator stations in the city communicated by phone in order to move supplies of gas around quickly and maintain high pressure in the lines. As a result of these measures, Canadian Western's revenues dropped by 10 percent.

To alleviate this shortage, Canadian Western began an effort to develop new supplies of gas. The company expanded its gas supply beyond Bow Island in 1921, when it opened the Chin Coulee well 40 miles east of Lethbridge. To cover the costs of this expansion, the company requested its first rate increase from its customers. This increase was grudgingly granted by the city, on the conditions that the company also construct a second ten-inch gas line from a site in the Turner Valley, as well as begin a drilling program at two other sites.

Two years later, in 1923, another gas company, called Northwestern Utilities Limited, was established in Edmonton. This company was a successor to a corporation formed in 1914 to develop the resources of the Viking Field, a deposit of natural gas in northern Alberta. During the summer and fall of 1923, a pipeline was constructed from the Viking Field to Edmonton under tense conditions, as the company raced to beat the winter freeze.

During this time, a controlling interest in Northwestern Utilities was held by the International Utilities Corporation, a company based in the United States, which financed, engineered, and managed a variety of public utilities. In 1925, this company also began to buy up shares in Alberta's Canadian Western, and the two utilities became sister companies, linked by ownership and shared expertise in management.

In the late 1920s, other non-gas utilities companies were established in Canada, which would later become linked to Northwestern and Canadian Western. These included Northern Power and Light, Ltd. and Mid-West Utilities, Limited, which in turn owned Vegreville Utilities, Ltd. During this time, Mid-West Utilities changed its name to Canadian Utilities, Limited, hoping to avoid confusion with another American utility company of the same name.

Northwestern suffered a major setback in January 1928, when shifting ice in a farmer's ditch broke the Viking pipeline, cutting off gas to Edmonton in -20 degree weather. Although gas was restored as quickly as possible, this event, and other concerns, prompted the company to begin an effort to duplicate this pipeline, increasing its capacity. Other safety measures were installed as well.

At the same time, Canadian Utilities was working to set up an electrical grid system in the areas where it served customers. The company purchased additional power plants in key locations, and then ran transmission lines between them. In this way, new communities were brought into the system, and antiquated equipment was gradually retired. In 1930, the network of Canadian Utilities companies was purchased by the Dominion Gas and Electric Company, a subsidiary of the American Commonwealths Power Corporation.

Weathering the Great Depression and World War II

With the advent of the Great Depression in 1929, Northwestern found that demand for its products dropped significantly, as many industrial customers went out of business and residential customers were forced to resume use of coal. Northwestern Utilities also faced a spectacular misfortune in 1932, when the leak of a Northwestern gas main in downtown Edmonton caused the destruction of a leading hotel in the city and several surrounding structures. The fire broke out in the basement of the Corona Hotel on a February evening, and firemen fought it throughout the night before they were able to bring it under control. The resulting lawsuits from this event threatened to put Northwestern into bankruptcy. In an effort to ensure that no such conflagration ever took place again, the company instituted a program of odorization of its gas for safety purposes. In 1934, Northwestern was handed a legal defeat in cases resulting from the hotel fire. This blow came on top of the generally bleak economic picture in Alberta at that time.

Northwestern's sister company, Canadian Western, fared better during the 1930s, adding customers in new communities and new features to its gas distribution system. One innovation involved the storing of excess gas resulting from oil extraction at Turner Valley, gas that had previously been burned off as a waste product. P.D. Mellon, Canadian Western's vice-president, worked with geologists on his idea for storing the gas via pipes at the Bow Island site. The resulting piping system was reversible and could therefore accept gas for storage in the summer and make it available again during peak winter months.

In the mid-1930s, the electric utility company, Canadian Utilities, was merged with the Union Power Company in an effort to stem the tide of losses that Canadian Utilities had suffered every year since 1928. Canadian Utilities was thereafter able to benefit from the proceeds of Union Power's coal holdings.

After Britain declared war on Germany in 1939, Canada, as part of the British Empire, became embroiled in World War II. Many employees of the gas and electric utilities of Alberta left their jobs to join the armed forces, and materials and supplies were also diverted to the war effort. In 1940, Northwestern installed heating, cooking, and water heating equipment at two air training schools being constructed in the area. Canadian Western also began serving air force training centers.

The wartime economy provided opportunities for some utilities and challenges for others. For example, Canadian Utilities was able to expand into the far northern territories of Canada, via the newly constructed Alaska Highway, and began supplying electric power to the booming town of Fort St. John, British Columbia. While Canadian Western was reporting record sales, Northwestern's efforts to meet increasing demand for gas were thwarted by the rationing of steel, which was needed to lay additional pipe.

In 1944, the Dominion Gas and Electric Company merged with the International Utilities Company, the old American partner of the Alberta companies. In doing so, International Utilities provided additional capital to the Canadian operations. The company used a portion of these funds to push forward with efforts at rural electrification. Test lines were run out to Vegreville in February 1945 and to Melfort, Saskatchewan. Moreover, International began investing in Northwestern and Canadian Utilities.

After the war's end in 1945, the utility companies resumed their normal operations and rate of growth. Alberta saw the formation of another new gas and electric company, Northland Utilities, Limited, which served customers in the Peace River area. Moreover, Canadian Utilities' operations were soon focused solely in Alberta, when the Saskatchewan Power Commission began buying up all the smaller utilities with a vision of nationalizing the industry in that province. A similar trend soon took Canadian Utilities out of British Columbia as well.

In 1947, Alberta's demand for gas began increasing rapidly due to a population boom and an accident at an oil well. Canada's oil boom began in February of that year with the discovery of oil near the town of Leduc, Alberta, and increasing numbers of people began moving to the area to share in the wealth. One year later, another well at this site, the Atlantic No. 3, went out of control, spilling oil onto the countryside for six months before igniting in September, and finally being subdued. Northwestern was soon struggling to meet the demand for gas.

Unifying Gas and Electric in the 1950s and 1960s

In 1954 the first step to uniting Alberta's gas and electric companies was taken, when one man, F. Austin Brownie, president of Northwestern and Canadian Western, was also appointed head of Canadian Utilities. Under Brownie, Canadian Utilities began expanding its Alberta holdings, purchasing the McMurray Light and Power Company, Limited, and Slave Lake Utilities.

In 1961, International Utilities, the corporate owner of the three linked Alberta companies, also purchased Northland Utilities, Limited, and merged this company into the group. At that time, due to changes in the Canadian tax structure, International Utilities also established itself as a U.S. corporation resident in Canada, hoping to blunt criticism of foreign ownership of the Alberta properties.

Later in the 1960s, International Utilities nearly doubled in size through the purchase of the General Waterworks Corporation. This move helped to pave the way for a major restructuring of the companies in the early 1970s, when Canadian Utilities became the corporate parent of Canadian Western, Northwestern, Northland, and Alberta Power, Limited, which was formed to take over the electrical operations previously run by Canadian Utilities. Northland was then merged into Northwestern. The resulting company, known as CU, became one of the largest investor-owned utilities in Canada. At this time, International Utilities also returned to residence in the United States.

Expansion and Diversification in the 1970s and 80s

In the early 1970s, a unified CU began to devote more of its attention to conservation and environmental awareness. In addition, the company began to branch out to other areas related to the utilities industry. In 1973, CU Engineering Limited was formed to provide consulting services; in 1975, CU Ethane Limited was formed to build and operate an ethane extraction plant in Edmonton as a joint venture; and, in 1976, CU Resources Limited was created to develop non-utility resource properties.

One of CU's missions during the 1970s was to respond to environmental issues. Canadians were becoming increasingly aware of the need to conserve energy, and also sought to enact laws for keeping their air and waters clean and protecting wildlife. Toward that end, the company formed an environmental planning commission, headed by Gordon R. Cameron, which worked to ensure that CU was respecting the environment by modernizing facilities to emit fewer pollutants. Moreover, the company investigated such novel ideas as using natural gas to power automobiles.

At the start of the 1980s, majority ownership of CU was transferred from International Utilities to ATCO, Ltd., a Canadian-based conglomerate that had started as a vendor of trailer homes in 1946. In the spring of 1980, ATCO paid $325 million for International's 58 percent share in the company, and installed its chairman as the chief executive officer of CU. In the wake of this purchase, the Calgary Power Company (which then changed its name to the TransAlta Utilities Corporation) offered to buy up the 42 percent of CU's shares that ATCO did not own. This offer led to a standoff between CU and TransAlta, with legal entanglements that reached all the way to the Canadian Supreme Court. In 1982, the two companies agreed to withdraw from the dispute and gradually dispose of each other's shares.

In the early 1980s, CU also suffered from the effects of a recession that hit Alberta. The company attempted to reduce operating costs and also applied for a rate increase to offset the financial downturn. In the spring of 1982, CU also restructured its subsidiaries, creating ATCOR Resources, Limited. This group was formed from the ATCO Gas & Oil operations and the non-utility branches of CU. Shortly after this merger, CU discontinued the engineering consulting branch, after demand for these services dropped.

In the mid-1980s, ATCOR became increasingly involved in frontier exploration. In 1986, the division was reorganized again, taking the name CU Enterprises, Inc. This entity specialized in oil and gas exploration and production, and the processing and marketing of natural gas. By 1987, it had become the largest direct marketer of natural gas to final users in Canada.

By the late 1980s, CU served more than 600,000 natural gas customers and 150,000 electric customers. The company continued to turn a profit, despite a sharp drop in growth for its main area of operation, Alberta. These earnings continued throughout the early 1990s. By the end of 1994, CU was servicing nearly 900,000 utility customers. Under the leadership of R.D. Southern, chairman and CEO, and J.D. Wood, president and CEO, the company also became involved in some new complementary operations, including the acquisition from ATCO of Frontec, a leading Canadian contractor of technical services with over $3 billion in assets and facilities. CU was also pursuing acquisitions of independent power plants in Western Europe, Australia, and the United States.

Gearing Up for Deregulation in the 1990s

In the late 1990s CU began to address the challenges associated with dramatic changes in the competitive landscape that would come from utilities deregulation. In anticipation of the new competitive environment, CU initiated various streamlining programs aimed at cutting costs and improving efficiency. In 1997, ATCO and CU consolidated their corporate headquarters, creating a single ATCO Group Corporate Office in Edmonton. In addition to eliminating duplicate office work and staff redundancies, the reorganization improved efficiency by shifting support services previously handled by CU directly into the operating companies that required them. The shift was also aimed at reinforcing the autonomy of the operating companies. Further belt-tightening was implemented in 1997 with the reduction of about 350 jobs from CU's utility companies, Canadian Western Natural Gas, Northwestern Utilities, and Alberta Power.

Another push for efficiency was made in 1998 when CU decided to merge its natural gas subsidiaries, Canadian Western Natural Gas Company Limited and Northwestern Utilities Limited, and to create an intra-Alberta transmission company and a province-wide distribution company. The new transmission company transported gas through high-pressure pipelines beyond urban areas within Alberta, while the new distribution company continued to deliver gas from the transmission systems to customers. CU anticipated that the establishment of separate transmission and distribution businesses would bring significant savings to customers and further position the company to become a major player in the newly deregulated Alberta energy market.

Principal Subsidiaries: Alberta Power Ltd.; ATCO Power Ltd.; ATCO Electric Ltd.; ATCO Gas and Pipelines Ltd.; CU Water Ltd.; ATCO Frontec Corp.; ATCO Midstream Ltd.; ATCO I-Tek Business Services Ltd.; ATCO Travel Ltd.; ASHCOR Technologies Ltd.; Genics Inc.

Principal Competitors: BC Gas Inc.; EPCOR Utilities Inc.; TransAlta Corporation.

Canadian Utilities Limited History

Company Perspectives:

Key Dates:

Company History:

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