Sam Insull and the Creation of Commonwealth Edison

 

In 1892, a young businessman from England who had settled in America found himself on the losing side of a merging between General Electric and Thompson-Houston.  Thomas Edison’s company was seeking to acquire Thompson-Houston.  J.P. Morgan backed Thomspon-Houston, forcing the acquisition of Edison GE, putting Edison himself out of business.[1]  The young businessman, Sam Insull, had worked to help build Edison GE and was placed into a quandary.  Faced with the prospect of working for the newly formed General Electric Corporation as a vice president or taking a substantial pay reduction to run Chicago Edison, Insull chose Chicago Edison.

Insull would lead the company for over forty years, developing the municipal utility into the service provider for much of northern Illinois.  As early as 1903, Insull was looking ahead to the merger of Chicago Edison with the nearby Commonwealth Edison to enlarge the companies service territory.[2]  Insull, having proven himself a capable leader, worked to serve on the board of multiple utilities in the Chicago area, slowly merging them into one entity, Commonwealth Edison. 

Insull established three strategies or guidelines for the company.  Per Hogan, these were to “maintain a highly efficient physical plant of adequate capacity, operate an aggressive marketing campaign to obtain a large base load, and to ensure continuous mass production with a large load factor.”[3]  While these principles are widely accepted in public utilities today, they were quite revolutionary and counter to the structure of Chicago’s electrical system of the early 20th century.  Thomas Edison’s model had been to support the construction of small generators for individual buildings, factories, or other facilities.  Some sections of cities were powered by a nearby generator, providing primarily electric lighting for homes and small businesses.  To lay the groundwork for his first and third principles, Insull began the construction of larger generating stations.

Insull’s would oversee the construction of larger, more efficient generating facilities around Chicago.  Purchasing the local groups and adding them to the growing Commonwealth Edison, Insull’s model was to encourage the establishment of localized monopolies.  In the instance of Commonwealth Edison, this monopoly would be the city of Chicago.  With each market area increase, Insull would work to reduce the cost per kilowatt-hour for the customers.  In the early years, the rates in Illinois were controlled by the locality.  Insull campaigned for the creation of a public board that would serve to regulate the cost of utilities, be they natural gas or electricity.  The creation of the Illinois Public Utilities Commission eliminated the ability of cities to control the rates charged within their boundaries.  On the surface, Insull’s work to create this board may seem counterintuitive, however, with the creation of a public board, the number of political and financial favors and forces in play was drastically reduced.

Commonwealth Edison grew in customer base from 10,000 customers in 1898 to 200,000 by 1913.  This was primarily due to Insull’s focus on marketing.  He was quoted as saying “Early to bed, early to rise, work like Hades, and advertise.”[4]  “Electric Shops” were placed throughout the city showcasing electric powered wares.  These items ranged from electric irons to electric automobiles, each providing another example of needed comfort to the home.  Insull went so far as to use popular figures of the day such as stage star Trixie Friganza in his advertising campaigns for these products.[5]  The model was simple, create the desire for improved creature comforts through these products and provide them to the customers, but more importantly provide the reliable power for the customer to use them.

Homes make up a small percentage of electrical demand in a given area.  Industry and other large loads were sought after by Commonwealth Edison.  Electric industrial refrigeration development was pursued as well as electrical use in the foundries and other industry within Chicago.  Chicago’s growth demanded the creation of public transportation.  Insull targeted and succeeded in gaining the contract to supply all electricity for the trolleys and electric trains that plied the city.[6] 

A company must adapt to survive.  Innovation was also a key to Commonwealth Edison’s success in the early 20th century.  To work more efficiently, Insull directed the use of horizontal condensers and turbines for newer stations, increasing output and decreasing the needed supply for coal.  On a trip home to England, Insull discovered electric meters in use.  Soon, these were being installed throughout Chicago.  This spirit of innovation would remain a key business practice of the company throughout its life.

Insull was eventually forced out of the company early in the Great Depression.  The company he built flourished in the 20th century.  The name changed from time to time, and coal gave way to natural gas and ultimately to atomic power.  Large base load, provided by efficiently run plants continuously remained the guiding principle regardless of the energy source until the company split on February 2, 2022.[7]


[1] John Hogan, A Spirit Capable: The Story of Commonwealth Edison (Chicago: Chicago Review, 1987), 33.

[2] Special to The New York Times., "Electric Concerns Prosper.: The Commonwealth and the Chicago Edison Company, both of Chicago, Enjoy Big Earnings," New York Times (1857-1922), 1903.

[3] Hogan, A Spirit Capable: The Story of Commonwealth Edison, 37.

[4] Ibid., 45.

[5] Ibid., 47.

[6] Special to The New York Times., "Chicago Traction Merger.: Committee of Capitalists to Draw Up Plans of $246,000,000 Combine," New York Times (1857-1922), 1908, .

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