PEOPLES ENERGY CORPORATION History

Company History:

Peoples Energy Corporation is a public utility holding company for two natural gas utility companies: the Peoples Gas Light & Coke Company, which delivers synthetic and natural gas to 844,000 customers in Chicago, Illinois, and the North Shore Gas Company of Waukegan, Illinois, serving 120,000 customers in 54 communities in northeastern Illinois.

Peoples Gas Light & Coke Company was initiated in 1855 to supply gas for street lighting and home heating and provide coal and coke for both industrial and residential uses. It began in Chicago at a time when the city was considered the western outpost of the United States; the U.S. Army's western headquarters were located at the Palmer House, a downtown Chicago hotel. Peoples Gas Light & Coke Company took advantage of readily available supplies of coal in Illinois and coal fields in western Pennsylvania to produce a manufactured gas used initially for street lighting. The by-product of the process was coke--a degassified form of coal used primarily in steel-making.

A canal that connected the city to the Mississippi River spurred much of Chicago's growth in its early years as it became a prime trading center, and the coming of the railroads in the 1850s certified its position as a primary city in North America. As the city of Chicago grew, Peoples Gas Light & Coke Company grew with it, buying competitors and extending its service area. It moved away from industrial customers, focusing more on gas street lighting and residential customers for both its gas and coal products. Peoples Gas rode this crest of development that accompanied the city's progress through the 1800s.

As gas street lighting was supplanted by electrical power, the company shifted its focus to the sale of gas for residential heating, and eventually for home heating. In 1929, the start of the Great Depression, the first long-distance steel pipeline was built to bring natural gas from the Texas panhandle to Chicago and other highly industrialized cities in the upper midwest. Peoples Gas was an equity partner in this venture and eventually bought-out its partners to become the sole owner and parent for Natural Gas Pipeline Company of America. This move improved business significantly, increasing the transmission of natural gas from producing fields to a number of utility companies and aligning the company for a decade of prosperity. Business soared through the 1950s, a time during which Peoples Gas Light & Coke shifted its primary source of gas from the manufactured variety to that being produced from wells in the southwestern region of the United States.

In the 1960s, Peoples Gas acquired the North Shore Gas Company. The acquisition brought new customers and the need to have additional gas supplies readily at hand near the market. This need gave new impetus to the usage of underground gas storage and the techniques that had been pioneered earlier by Natural Gas Pipeline Company of America.

As a result, Peoples Gas developed a major storage field 130 miles south of Chicago, near Champaign, Illinois, taking advantage of a porous sandstone formation that gives it the capability to store 142 billion cubic feet of natural gas in a pocket or lens of porous rock that is surrounded by impervious shale rock formations. When carefully monitored, underground gas storage is a safe and common practice that allows gas utility companies to store and deliver large quantities of gas in spent or low-pressure producing fields or aquifer formations during periods of low user demand.

Units of Peoples Energy Corporation buy natural gas originating from the American southwest and from Canada during summer months to supply up to 40 percent of their customers' needs during Chicago's cold winters. The utilities augment their underground storage facilities with twin, above-ground storage tanks that hold the equivalent of one billion cubic feet of gas. Those 125-foot-high tanks store the gas in liquefied form at minus 275 degrees Fahrenheit (minus 153 degrees Celsius).

In addition, Peoples Gas operates a gas producing facility, the McDowell Energy Center, near Joliet, Illinois. This facility produces synthetic gas from a variety of liquefied feedstocks and mixes it with natural and propane gases to meet customer demands on the coldest winter days.

Peoples Energy was reorganized and incorporated in 1967, but its service has continued unabated and quietly throughout its history. The holding company divested itself of its nonutility operations, including Natural Gas Pipeline Company, in 1981 to focus on its two operating utility companies.

Eight years later, in 1989, Peoples Energy completed a $43 million construction project. It consisted of a second pipeline from its underground storage facilities to its Chicago and northeastern Illinois service areas, allowing the company to improve its efficiency and reliability during times of peak demand. That same year the company also improved its sources for natural gas through a connection with another pipeline company, Trunkline Gas Company, the fourth such company that now supplies Peoples Gas.

On January 17, 1992, a gas explosion in a northwestern neighborhood of Chicago caused fires in 18 buildings, the deaths of four people, and injuries to many others. The cause of the fire was a suspected surge in gas pressure. Peoples Gas provided relief support to victims of the tragedy, including a temporary service center, replacement of damaged appliances, and provisions for food and shelter. The utility subsequently replaced the remaining low-pressure gas distribution mains and service lines in the area because they may have been over-stressed when the incident occurred.

At the end of its 1991 fiscal year, Peoples Energy reported that it had 3.065 billion cubic feet of natural gas available for peak-day delivery, of which 2.65 billion cubic feet were available to Peoples Gas and 415 million cubic feet were available to North Shore Gas.

Peoples Energy was planning to spend $21.2 million in 1992 to build a new pipeline supply connection for its North Shore Gas subsidiary and was spending $9.9 million to install new, high-tech meter-reading equipment for its Peoples Gas subsidiary. In addition, the company announced plans to expand its underground storage facilities near Champaign.

Peoples Energy Corporation remains dominant in Illinois's natural gas service territory. The company will also profit from the gentrification of parts of the city of Chicago, since 98 percent of rehabilitated housing is equipped with gas heating, cooking, and water heating. Furthermore, the company is promoting several new technologies--gas heat pumps, gas-powered cooling units, and gas-powered electrical cogenerating units designed to increase efficiency while reducing costs.

Since December of 1990, the reins of the company have been in the hands of Richard E. Terry, who replaced Eugene A. Tracy as chairman and chief executive. As one of the largest utility holding companies in the United States, Peoples Energy has been a quiet, conservative firm that can be expected to continue its success in a mature market.

Principal Subsidiaries: Peoples Gas Light & Coke Company; North Shore Gas Company.

Further Reading:

• Commerce, April, 1, 1990.
  Chicago Sun Times, November 18, 1990.
  Business Insurance, January 27, 1991.
• Peoples Energy Corporation Annual Report, 1991.
• Heim, M. C., Peoples Energy Corporation, A. G. Edwards & Sons, March 23, 1992.

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

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