DPL Inc.

views updated

DPL Inc.

P.O. Box 1247
Dayton, Ohio 45402
U.S.A.
(513) 224-6000
Fax: (513) 259-7385

Public Company
Incorporated: 1986
Employees: 2,900
Sales: $1 billion
Stock Exchange: New York

DPL Inc. was formed in 1986 to be the holding company for Dayton Power & Light Company (DP&L), which has been providing electricity to customers in Central Ohio for more than 80 years. The company that would become Dayton Power & Light was incorporated in March of 1911 as the Hills & Dales Railway Co., a provider of power for electric railways in Dayton. The same year, when it bought the Dayton Lighting Co. and the Dayton Citizens’ Electric Co., the firm’s name was changed to Dayton Power & Light Company. Since its inception, DP&L has acquired smaller competitors, upgraded facilities, and constructed new plants, becoming one of the largest utilities in Ohio.

In its early history, DP&L made several acquisitions. In 1914 the company bought the Xenia Gas & Electric Co., the Wilmington Water & Light Co., and five other companies. By 1918 the utility was providing electric light and power to Dayton, Xenia, Piqua, Wilmington, and 39 smaller towns.

The utility’s Miller’s Ford power station came into operation in 1918 and ran at a capacity of 25,000 kilowatts (kw). Eventually operating at 105,000 kw, it would serve as the DP&L’s main generating station for several decades. Also in 1918, the utility—which now owned generating stations in Dayton, Piqua, and Wilmington—was providing light and power to 28,000 customers and reported net earnings of $301,000 on revenue of $2.4 million.

DP&L continued to grow under long-serving president and general manager Frank M. Tait. In the 1920s, when it became a subsidiary of the holding company Columbia Gas and Electric Corp., DP&L acquired several small electric companies. With an output of 196 million kilowatt hours (kwh), the utility saw net income rise to $744,000 on revenue of $5.1 million for 1923. DP&L diversified in 1925, entering the gas business with its purchase of Dayton Gas Company’s property. The following year it merged with the Washington Gas & Electric Company. In 1928 DP&L greatly increased its service area with the $1.5 million purchase of the Ohio Fuel and Gas Company and its franchises in 26 communities.

By the late 1920s DP&L owned one major and five small generating stations as well as a gas distribution and steam heating system in Dayton. In 1923 the firm had 60,000 electric customers; by 1928, the number had jumped to 91,000 electric customers and 78,000 gas customers. Revenue for 1928 totalled $10.5 million, bringing net income to $2.7 million.

DP&L further expanded during the 1930s, despite the Great Depression that crippled the United States economy; between 1925 and 1935 the utility purchased 12 electric and gas systems. But the Depression also brought new challenges. In 1932 DP&L offered an $8.9 million bond issue to help reduce the company’s indebtedness to Columbia Gas and Electric, its parent company. Not immune to the labor strife that plagued many U.S. industries during the decade, the company faced a brief interruption in its service when 1,100 electrical workers struck in March of 1935.

As the Depression drew to a close, DP&L, under the continued leadership of F. M. Tait, stuck to its main business: providing electricity for homes and businesses and furnishing steam heat in part of Dayton and water heating service in Wilmington. An addition to the company’s main facility, the Miller’s Ford power station, was completed in the early 1940s. DP&L’s electric and gas customers—which totaled 180,000 in 1938—increased slowly but steadily during the World War II years, so that by 1944 there were 124,000 electric and 101,000 gas customers. Total revenue rose dramatically from $12.6 million in 1938 to $21.6 million in 1944, while profits stagnated, falling from $2.6 million in 1938 to a meager $1.5 million in 1944.

In 1945 F. M. Tait was still chairman, president, and general manager, and the utility had nearly 1,200 employees. In addition to three steam heat generating plants in Dayton and a water heating plant, DP&L owned three steam electric generating stations with a capacity of 206,000 kilowatts. The company continued making acquisitions, purchasing the western division of Marion-Reserve Power Co. In 1946 DP&L gained its independence when Columbia Gas and Electric offered DP&L’s entire common stock to the public. Two years later, DP&L acquired six electric companies and one gas utility from United Public Utilities Corporation.

During the post-World War II years, DP&L embarked on a massive construction program. It initiated a project that would entail $75 million in expenditures by 1950 and another $58.4 million to be spent through 1955. In 1946 construction began on the multi-unit O. H. Hutchings Generating Station, which was located ten miles south of Dayton. With units completed in 1951, 1952, and 1953, the Hutchings plant cost DP&L $50 million. In addition, to supplement its natural gas supply for short periods in emergency situations, the company built a $467,000 propane gas mixing plant in 1946.

By 1951 DP&L had 202,000 electric customers and 133,000 gas customers, up from 152,000 and 102,000, respectively, in 1945. Electricity accounted for approximately two-thirds of total revenue, which was $48.9 million in 1951, up from $22 million in 1945. Income rose in the same period from $2.5 million to $7.26 million.

Aside from expanding through new construction during the 1940s and 1950s, DP&L continued to acquire small companies. In 1955, DP&L bought Lake Gas Co. and in 1957 purchased the electric generating and distribution system of Sabino, Ohio. By 1958 DP&L was providing electric service to 259,000 customers and gas service to 188,000 customers. Revenue increased from $36 million in 1952 to $51 million in 1958. But income grew more slowly, climbing from $8.3 million in 1952 to $10.5 million in 1958.

DP&L also ventured into the area of nuclear power during the 1950s. In 1952 DP&L and 14 other utilities organized the Ohio Valley Electric Corporation to supply power to the Atomic Energy Commission at its new plant near Portsmouth, Ohio. And in 1957 DP&L helped organize the East Central Nuclear Group, which had contracted with the Atomic Energy Commission to construct a nuclear reactor.

In 1958 J. M. Stuart was named president and chief executive officer, succeeding F. M. Tait. By 1963, the same year Stuart was named to the additional post of chairman of the board, DP&L had 2,640 employees. The company bought a site on the Ohio River near Manchester for a generating station that would have an eventual capacity of 1 million kilowatts.

J. M. Stuart remained chairman for much of the 1950s and early 1960s, when the firm continued its modest growth by buying other small companies and building new generating facilities. In 1959 two new units were completed at the Tait station. The following year, the utility completed a $2.5 million propane gas storage and mixing plant program that included a seven million-gallon cavern near Middletown and some new supply lines.

DP&L also expanded by cooperating with other Ohio utilities during the 1960s. In 1961 the firm made an agreement with Cincinnati Gas & Electric Company (CG&E) to operate and maintain transmission interconnections and interchanges. Along with Columbus & Southern Ohio Electric Company (CSO), the two utilities agreed to pool resources to build new plants in 1963. The first undertaking was a $50 million, 450,000 kilowatt generating unit at CG&E’s Beckjord station. It came into service in 1969, and since 1973 DP&L has owned 50 percent of it. The second project was the construction of the two million-kilowatt coal-fired J. M. Stuart Electric Generating Station, which began in 1965 and cost the utilities $375 million. The first of the plant’s four units were operating by 1970, the second came on in 1971, the third in 1972, and the fourth in 1974.

Meanwhile DP&L’s revenue and customer base continued to grow. In 1965 the firm counted 306,000 electric customers and 236,000 gas customers. Total revenues jumped from $89 million in 1959 to $123 million in 1965, and net income rose from $10.5 million in 1959 to nearly $17 million in 1965. That year, DP&L bought the gas and electric utilities system of Bellefontaine, Ohio, for more than $5 million and offered to buy the electric utility plant of Miamisburg, Ohio, for $4.6 million.

In the late 1960s, when companies were becoming increasingly aware of environmental problems, DP&L started a program to persuade industrial companies to convert from coal or oil to gas, a measure that would reduce air pollution.

DP&L approached the 1970s bent on expansion. In 1969 the utility spent a record $65.5 million on construction, announcing a third joint venture with Cincinnati Gas & Electric and Columbus & Southern Ohio Electric: a nuclear power station to be built on the Ohio River, 28 miles east of Cincinnati. When they announced the plan, the companies estimated it would cost $240 million and be completed by 1975. DP&L had a 31 percent share. In 1970 the utilities announced plans to build a second nuclear generating unit at the same site, but the expanson was deferred the same year, since, even at this early date, it was apparent the companies could not meet the construction schedule for the first unit. To make up for the lost projected capacity, DP&L and CG&E announced plans to build an additional coal-fired unit at the Miami-Fort generating station. DP&L would own 34 percent of it. The two units at Miami-Fort went into commercial operation in May of 1975 and February of 1978, respectively.

In 1969 Kenneth Oxley was elected president and CEO of DP&L, succeeding Stuart, who remained as chairman until 1970. Oxley was named chairman in 1970, and Robert Killen became president and chief executive officer.

Killen led the utility in its continuing expansion efforts. In 1971, DP&L bought the Municipal Electric System of Troy for $12.5 million. That year, DP&L filed a request for a 15 percent rise in electricity rates, the first such increase it had ever sought. The request was granted in 1973.

In 1972 the consortium of utilities—DP&L, CG&E, and CSO—received final approval for a proposed nuclear power plant at Moscow, Ohio. DP&L expected to spend $83.2 million on construction in 1973 and $118 million in 1974. The three companies also developed new, non-nuclear units. A $125 million, 800,000-kilowatt coal-fired unit at the Conesville Station in Columbus, of which DP&L owned 16 percent, began commercial operations in 1973.

DP&L continued to grow in the late 1960s and early 1970s. The electricity customer base increased slowly, from 277,000 in 1966 to 364,000 in 1972; the number of gas customers rose from 242,000 in 1966 to 268,000 in 1972. Total revenue for DP&L—which employed 3,253 people in 1972—jumped in the same period from $134 million to $220 million, and net earnings climbed from $18 million in 1966 to more than $27 million in 1972.

In 1974 construction began on the 600,000-kilowatt, $588 million Killen Generating Station. DP&L owned 67 percent of the facility, which became operative in 1982, four months ahead of schedule. DP&L’s headlong rush to build new facilities was slowed in the following year, however, as it slashed $92 million from its capital outlay budget for the next five years. Cost-cutting measures caused some delays in future joint construction projects.

In 1975 Robert E. Frazer joined DP&L as president, assuming the additional post of CEO three years later and the title of chairman in 1982. DP&L headed into the 1980s with a huge construction budget of $245 million in 1980 and $221 million in 1981. In 1979, in fact, the utility had foreseen nearly $1 billion in capital spending for the coming years and moved to raise funds by issuing more shares.

DP&L’s revenue and customer base continued to grow, as the utility furthered its expansion. By 1979 the company had 416,000 electric customers and 262,000 gas customers. Total revenue jumped to $577 million, and net income reached $61 million. At that time, DP&L had several units under construction: two at Cincinnati’s new East Bend Generating Station with completion slated for 1981 and 1985, and two at DP&L’s Killen Generating Station, which were scheduled to be finished in 1982 and 1985. DP&L would own 31 percent of the East Bend plant and 67 percent of the Killen units. In 1980 DP&L and Cincinnati agreed to delay by a year the completion of a coal-fired unit on the East Bend station.

While the utility did quite well in the early 1980s, net revenue actually fell between 1984 and 1986. In 1984 the DP&L’s revenue was more than $1 billion for the first time in its history and the utility reported a net income of $103 million. But with the number of gas customers at a standstill and an only slightly increasing electricity customer base, revenue fell in 1985 and 1986, when it totalled $963 million, producing income of $138 million.

DP&L had earlier realized it was in for some slow growth. In 1982 the utility planned to add only 2,000 customers, a sharp decrease from its average of 20,000. In a controversial cost-cutting move, DP&L reduced its work force by 600 employees, or approximately 16 percent.

To make matters worse, the William H. Zimmer Nuclear Power Plant turned into a nightmare. In 1969 work had begun on two nuclear units that were located near Moscow on the Ohio River. Considerably behind its construction schedule, the Zimmer plant was one of the industry’s most troubled projects. By 1980 it had become clear that it would be difficult to finish even one unit on schedule. That year shareholders defeated a directors’ proposal to halt construction. DP&L estimated that abandoning the Zimmer plant, which was 95 percent complete, would result in a loss of nearly $300 million.

In 1982 the Nuclear Regulatory Commission ordered work stopped on the plant. Consequently, DP&L demanded arbitration to decide whether Cincinnati Gas & Electric had mismanaged the project. The following year DP&L proposed converting the stalled Zimmer nuclear plant to a fossil fuel unit. The utilities realized, however, that they would need another $1.8 billion to finish the project and that canceling it would force them to make large write-offs.

In 1984 DP&L, CG&E, and CSO jointly announced they were immediately halting construction of the plant, citing its escalating cost and long, expensive delays in obtaining federal approval for a license to operate a nuclear plant. The Bechtal Corporation soon tried to buy an interest in the project and keep it nuclear, but was rebuffed. Later in 1984 CG&E and CSO reluctantly acceded to DP&L’s proposal to convert the plant, at a cost of $3.4 billion, into a 1,300-megawatt, coal-fired generating unit scheduled to begin operations in 1991. As a result of the agreement, DP&L’s ownership stake was reduced from 31.5 to 28 percent.

In 1984, in the midst of a Justice Department investigation to determine if false records were kept during construction of the Zimmer plant, DP&L and the other two utilities sued General Electric (GE) to recover damages incurred because of design and construction modifications made by GE. In 1987 GE settled the lawsuit, paying the three utilities $78.5 million.

DP&L’s conduct during the case against GE gave it a reputation for taking risks and breaking ranks. Indeed, under the leadership of Robert Frazer, who had been trained as an accountant rather than an engineer, DP&L acquired a unique image. The company did away with frills and had no public relations department or personnel officer. It became a lean, serious enterprise, capable of completing projects ahead of schedule. In fact, while the Zimmer project lagged years behind schedule, the Killen plant, which DP&L built in the early 1980s, was completed four months ahead of schedule.

DP&L had to write off $242 million over three years because of expenses incurred from the Zimmer project. In 1985 alone, DP&L took a $100 million after-tax charge against earnings. Because of the write-off, net earnings sank to only $56 million.

A major reorganization occurred in 1986, and a holding company called DPL Inc. was formed; Dayton Power & Light Company was its principal subsidiary. In 1988 Peter Forster, who had previously been named president and chief executive officer, was appointed to the additional post of chairman, replacing Robert Frazer. By that year the firm also owned a 7.2 million-gallon propane storage cavern and above-ground storage tanks with a capacity of 1.35 million gallons. It also owned two steam heat generating plants in Dayton.

DP&L headed into the 1990s spending less on construction, as the budget fell from $269 million in 1990, to $189 million in 1991, and $61 million in 1992. The number of customers continued to grow slowly, standing at 449,000 for electricity in 1989 and 276,000 for gas. Revenue, however, was relatively stagnant; total utility service revenue was $956 million in 1989, down from $983 million in 1988, while net income stood at $144 million in 1989. In 1990 DP&L’s revenue was $954 million, and net income was $153 million. Though revenue jumped to $1.005 billion in 1991, income dropped to $119 million.