WPL Holdings, Inc.

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WPL Holdings, Inc.

P.O. Box 2568
Madison, Wisconsin 53701-2568
U.S.A.
(608) 252-4888

Public Company
Incorporated: 1924 as Wisconsin Power and Light Company
Employees: 3,037
Sales: $648.8 million
Stock Exchange: New York

WPL Holdings, Inc., is the parent company of Wisconsin Power and Light, the dominant supplier of electric power in south-central Wisconsin. Wisconsin Power and Light does not serve Milwaukee or the majority of the capital city, Madison, but nevertheless is one of the largest power companies in the state, providing electric power to over 371,000 customers in more than 600 rural and industrial communities. The company also operates numerous hydroelectric plants on the Wisconsin River, renowned earlier in the twentieth century as “the hardest working river in the nation.”

Wisconsin Power and Light was created in 1924 through the merger of six rural power companies—Eastern Wisconsin Power, Middle Wisconsin Power, Janesville Electric, The Mineral Point Public Service Company, The Wisconsin Utilities Company, and The Wisconsin Power, Light & Heat Company. Some of these companies trace their origin to the 1850s when manufactured coal gas was provided to customers in buried wooden mains.

The merger was led by financier Samuel G. Insull, a former secretary for Thomas Edison, who later built the Commonwealth Edison Company in Chicago. Insull came to Wisconsin from the Milwaukee Electric Railway & Light Company in 1917, after having engineered the purchase of hydroelectric plants in Wisconsin Dells and Prairie du Sac on the Wisconsin River. During this time, many electric companies were being organized as outgrowths of electric railway systems. Even small towns in Wisconsin had extensive electric rail networks that required massive supplies of power. Residential electric service came only as companies endeavored to sell excess capacity. Over the ensuing seven years Insull’s holding company, the Middle West Utilities Company, took control of numerous utility systems throughout southern and eastern Wisconsin, stitching together what later would evolve into a massive power grid.

Wisconsin Power and Light served mostly agricultural areas in Wisconsin, with the exception of the paper industries in the Fox River Valley and manufacturing facilities in Janesville, such as the General Motors plant. The region was stable, well populated, and poised for tremendous growth.

After the 1926 consolidation of the Wisconsin River Power Company—operator of the Prairie du Sac dam— Wisconsin Power and Light absorbed more than 100 smaller electric and gas utilities and cooperatives not already controlled by Middle West Utilities. Included were the Janesville Traction Company and the Beloit Traction Company.

Public transportation systems were popular and profitable in the years before Henry Ford introduced the auto assembly line. That manufacturing innovation, however, made automobiles affordable to a greater number of people—virtually all of whom stopped riding the electric trolleys and trains. As ridership declined, the directors of Wisconsin Power and Light decided to drive the systems into the ground, diverting repair funds toward the purchase of buses. As a result, the company created the Orange Line Bus Company, serving communities throughout southern Wisconsin.

Insull’s Middle West Utilities Company was one of the largest and most powerful holding companies of the day with controlling interests in power, water, and transportation utilities from the Great Plains to the East Coast, in addition to securities and investment companies. Insull’s model was widely imitated. The 1930s, however, proved to be disastrous years for Middle West Utilities and its subsidiary, Wisconsin Power and Light.

In August of 1929, under the leadership of chief engineer Grover Neff, Wisconsin Power and Light orchestrated the first of many interconnection agreements with neighboring utilities. This enabled Wisconsin Power and Light to trade excess generating capacity with other power companies during peak periods. But continued growth in its own service territory forced the company to expand and update the generating system and build a large new plant on Lake Michigan, south of Sheboygan. The resulting Edgewater Generating Station was coal-fired, marking a break from Wisconsin Power and Light’s history as a hydroelectric utility.

The stock market crash in 1929 had triggered a decline in industrial production and the collapse of hundreds of enterprises. Many of Wisconsin Power and Light’s customers simply ceased to exist. The election of Franklin D. Roosevelt to the U.S. presidency in 1932 brought into power a new administration that was opposed to the institution of investor-owned utilities and their parent companies. Even worse for the utility company, Wisconsin’s Public Service Commission was populated with neosocialists, while the legislature and statehouse were controlled by Progressives; both factions were bent on dismantling huge combines such as Middle West Utilities. Wisconsin Power and Light was soon suffocating under overzealous regulation and extreme new depreciation rules.

Insull had come under fire for contributing to Illinois Commerce Commission’s chairman, Frank Smith, and his 1926 senate campaign. Insull lost considerable power and influence in regulatory and legislative circles as public figures sought to distance themselves from the utility mogul. In deep financial straits, Insull’s financial empire became the object of a takeover by New York financier J. P. Morgan. After a failed attempt to enlist the aid of Cleveland industrialist Cyrus Eaton, Insull was forced to place his companies in the hands of a Chicago bankruptcy receiver. Insull, his brother Martin, his son Samuel, and Marshall Sampsell—president of Wisconsin Power and Light—were forced to resign their positions. In September of 1932, the receivers appointed Grover Neff to head Middle West Utilities.

Neff implemented a strict cost-control program that called upon the company’s shareowners, many of whom were customers, to mobilize political support for relief from regulatory and legislative constraints. This support led to the defeat in 1934 of a referendum to have the state of Wisconsin take over and operate Wisconsin Power and Light.

Grover Neff, already reputed as the “father of rural electrification,” was successful in placing the Middle West Utilities company on firmer ground. Having understood the formula for increasingly profitable economies of scale and having demonstrated that interconnection with other companies could alleviate serious distribution problems, Neff began a serious rural electrification effort long before the federal government mandated one through the Rural Electrification Administration. He saw tremendous potential for electrification of the agricultural and rural industries and actively promoted the use of electricity for lighting, heating, and machinery.

However, the company’s financial troubles made securing funding for further expansion or even for maintenance nearly impossible. Instead, Neff redoubled the company’s advertising efforts to raise electrical usage. He traveled the state promoting use of electricity, claiming that “diversified agriculture needs electric service to put it on a par with other industries.” Billboards and newspaper advertisements encouraged customers to buy more electrical appliances and install outlets on every wall.

Wisconsin Power and Light found no real relief from its woes until 1940, when unfavorable 25-year agreements to supply power to the Milwaukee Electric Railway & Light Company and Madison Gas & Electric Company (MG&E) finally expired. Also at this time, the General Motors operation at Janesville, the Fairbanks Morse plant in Beloit, and dozens of small lead and zinc mines began to step up production. On the eve of World War II, the federal government built the mammoth Badger Ordinance ammunition plant near Baraboo. Industrial power usage was growing strongly.

The Second World War put tremendous strains on all aspects of industry as the country strived to gain footing in the conflict. A coal workers’ strike in 1943, coupled with serious railroad transportation problems, resulted in widespread coal shortages. But with only one coal-burning plant, Wisconsin Power and Light remained shielded from these problems. Coal supplies were easily arranged from Chicago using iron ore boats returning to the ranges of the Upper Peninsula of Michigan. However, cargo mixing caused minor problems, including occasional shutdowns when iron began to contaminate the furnaces at the Edgewater plant.

The end of the war, in 1945, renewed demand for products and services throughout the economy. The re-entry of 8 million soldiers into the work force provided the engine for strong economic growth that continued for the next 15 years. This growth neccesitated the construction of the coal-fired Blackhawk Generating Station in Beloit and expansion of the Edgewater Generating Station. During the early 1950s, Wisconsin Power and Light built a third coal-burning plant on the Rock River and, as part of a joint venture with Wisconsin Electric Power —the successor to Milwaukee Electric Railway & Light—a hydroelectric plant on the Wisconsin River near Necedah.

Despite a shortage of steel pipe caused by the Korean War, Wisconsin Power & Light’s gas operations grew considerably after 1949, when the Michigan-Wisconsin pipeline connected southern Wisconsin to natural gas suppliers in Texas. In less than 15 years, natural gas operations comprised one-sixth of Wisconsin Power and Light’s annual revenue.

In December of 1953, Wisconsin Power and Light took over Iowa-based Interstate Power Company’s Wisconsin operations as Interstate moved to sell off geographically distant properties. This addition of rural territory, coupled with nearly 10 percent annual growth in rural electricity consumption, required the company to build another large plant on the Mississippi River at Cassville. Like the Black-hawk plant, the new Nelson Dewey Generating Station was fired by southern Illinois coal, which was supplied by river barge and rail.

During this period of growth, Wisconsin Power and Light spun off from Middle West Utilities. The Public Utilities Holding Company Act of 1935 forced utility holding companies throughout the United States to divest their operations over the years. Wisconsin Power and Light became independent in 1948, gaining a separate listing on OTC exchanges.

Grover Neff retired as president in 1954, but remained with the company as chairman of the board. Carl Forsberg succeeded Neff as president and initiated a limited management centralization of the company, creating nearly a dozen large operating divisions. Forsberg subsequently was succeeded by J. Don Howard in 1965 and James Underkofler in 1968. During the tenures of Forsberg and Howard, Wisconsin Power and Light witnessed the practical application of nuclear power for electrical generation by Commonwealth Edison and Minneapolis-based Northern States Power Company. Wisconsin Power and Light expressed strong interest in this new energy source—one that produced electricity “too cheap to meter.”

In 1967, a year after Wisconsin Electric Power announced plans to build the Point Beach nuclear plant on Lake Michigan, Wisconsin Power and Light finalized plans to construct a plant near Kewaunee, also on the lake, in a partnership with Wisconsin Public Service Corporation and Madison Gas and Electric. As part of the partnership agreement, Wisconsin Power and Light promised to spearhead development of a coal-fired plant, the Columbia Energy Center, on the Wisconsin River near Portage.

When the Kewaunee plant was completed in June of 1974—two years behind schedule—the three companies joined Wisconsin Electric Power in developing plans for a much larger nuclear station on the shores of recreational Lake Koshkonong. The complexity of nuclear plants, however, increased construction time to almost ten years. During that time, the growth in demand for electrical power slowed, and minor, but well-publicized, nuclear plant accidents galvanized growing public opposition to nuclear power. The costs of building and securing licensing for nuclear plants grew by a factor of ten.

In January of 1977, the Wisconsin Department of Natural Resources informed Wisconsin Power and Light and its partners that the license request for a nuclear plant at Lake Koshkonong was rejected. In response, the companies proposed a nuclear plant at Haven, near Sheboygan. Shortly after, however, the Three Mile Island nuclear plant in Pennsylvania experienced a partial meltdown.

Resistance to nuclear power found fertile ground among environmentalists and students at the University of Wisconsin, who enjoyed growing political power. Faced with these obstacles, Wisconsin Power and Light abandoned the Haven project in 1980 and further plans for nuclear energy. Meanwhile, the utility and its partners continued pursuing development of the Columbia plant, later winning approval to build a second identical complex adjacent to the site. The second unit began commercial operation in 1978.

James Underkofler, noting increased risks associated with operating only within a single highly regulated industry, championed the cause of establishing a holding company for Wisconsin Power and Light. The idea first circulated in 1981, and won quick shareholder approval. But the new entity, WPL Holdings, was not established until 1988, when regulators and dozens of government agencies finally gave their approval.

Planning for his succession, Underkofler chose Erroll Davis, a talented manager with experience at Atlantic Richfield, Ford, and Xerox, to be his successor in 1987. The following year, Davis was named CEO of WPL Holdings.

Wisconsin Power and Light maintained good relations with Madison Gas & Electric, the power company serving Wisconsin’s capital city. Although surrounded by Wisconsin Power and Light territory, MGE remained independent of its larger neighbor. The two companies did not maintain any written agreements on service boundaries; MG&E would serve only Madison with Wisconsin Power and Light selling MG&E its facilities if and when the city expanded boundaries.

This comfortable arrangement came to an end in the late 1960s though, when a developer announced plans for a large shopping mall just outside the city limits in Wisconsin Power and Light’s Service territory. Because Madison planned to annex the area, MGE asked to serve the new development. Apparently tired of continually ceding high-use customers to MGE, Wisconsin Power and Light refused. The matter eventually was settled in Wisconsin Power and Light’s favor by the state Supreme Court, but the first disagreement between the two neighboring utilities was not the only dispute.

WPL Holdings revealed an intent to purchase MGE through a stock swap with MGE shareholders in March of 1989. While the proposed merger of the two companies seemed to make sense, MGE management refused to poll shareholders or discuss the matter in any manner. The “friendly” offer was ignored until WPL Holdings finally retracted the proposition in June of 1989.

Under the leadership of Erroll Davis, WPL Holdings adopted a new organization built around customer service. The operating divisions, established by Carl Forsberg, were consolidated into three regions, each containing numerous more customer-focused operating districts. The company focused attention on winning regulatory reform and support for conservation efforts that would help prevent the need to build expensive new plants.

As WPL Holdings struggled to win reforms in the 1990s, the goal of extracting greater efficiency from operations remained. And, while the holding company still harbored an interest in Madison Gas & Electric, clearly defined partnership agreements with neighboring companies ensured continued management stability and continuity.