Washington Water Power Company

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Washington Water Power Company

East 1411 Mission Avenue
Spokane, Washington 99202
U.S.A.
(509) 489-0500
Fax: (509) 482-4184

Public Company
Incorporated: 1889
Employees: 1,330
Sales: $566.8 million
Stock Exchanges: New York Pacific

The Washington Water Power Company (WWP) is a shareholder-owned utility that supplies electricity and gas to customers in areas of Washington, Idaho, Oregon, and California. The company, which has been operating for more than a century, has received three Edison Awards for its “distinguished contribution to the development of electric light and power for the convenience of the public and the benefit of the industry,” as stated on the medal.

George A. Fitch was the first person in Spokane Falls— which was later renamed simply Spokane—Washington, to build an electric generator. Construction of the dynamo, located in the basement of a flour mill, began on September 2, 1885, three years after Thomas Edison had built the world’s first central generating station.

A year later Fitch was bought out by a group of local businessmen who, operating as the Spokane Falls Electric Light and Power Company, ordered a complete electrical lighting plant from Edison. It soon became evident, however, that this one plant would not be enough to meet the needs of the growing town. To amass the capital necessary for the company’s expansion plans, the owners began to seek out interested investors.

What they found was the Edison Electric Light Company and its owner, Thomas A. Edison. In exchange for payment in both cash and stocks, Edison was willing to fund the plans. Of course, in addition, Edison also received a 30 percent royalty from every company using his equipment. Thus, Spokane Falls Electric Light and Power Company was reorganized as Edison Electric Illuminating Company. Thomas Edison’s associate S. Z. Mitchell supervised the construction of the new plant, which was completed in 1888 and had four times the generating capacity of the previous plant.

Still, it was obvious that the need for electricity far surpassed the capacity. In 1889 a group of area developers decided the lower Spokane Falls could be harnessed to make up the difference, but they were unsuccessful in their efforts to interest East Coast investors, who did not believe in the value of hydro power. A group of local investors, however, filled the need when they organized the Washington Water Power Company on March 13, 1889, in order to develop the lower falls.

F. Rockwood Moore—who became WWP’s first president—and J. D. Sherwood were the biggest shareholders with 1,960 and 2,000 shares, respectively. The men were typical of the investors, successful businessmen who had made their fortune by taking chances on risky ventures. Their stakes in WWP were no exception. Initially there were some questions raised concerning such circumstances of the company’s incorporation as the amount and value of property owned by WWP, the estimates of construction costs, and the viability of developing the lower falls. In addition, the company faced competition from the Edison Electric Illuminating Company, in which many of the founders also had investments, as well as the Spokane Falls Water Power Company, which had been organized to harness the generating capacity of the upper falls. Within two years, however, WWP had built a dam and a power station at Monroe Street with more than twice the capacity being generated on the river at that time.

With Monroe Street Station’s huge share of the electrical output, smaller plants found it difficult to compete. In 1889 WWP had begun to purchase shares of the Edison Company, with which it operated closely, and by 1891 WWP had completely acquired its competitor. Through this acquisition and the expansion at the Monroe Street Station, generating capacity grew to 1,439 kilowatts.

Throughout the 1890s, believing the company could achieve further growth in this manner, WWP purchased shares in several streetcar companies in order to encourage residential expansion. The theory behind this strategy was that streetcars—themselves powered by electricity—would draw people into areas reached by the cars, thereby increasing demand. One of the companies in which WWP acquired a controlling interest was the Spokane Street Railway Company, which also owned Twickenham Park. To increase streetcar use, in 1895 Twickenham was incorporated as an amusement park that included a swimming pool, hence the name was changed to Natatorium Park. WWP owned and operated the park until 1929.

The financial panic of 1893 stalled the company’s growth and potential for profit, but it was rescued from bankruptcy by William A. White, a New York City financier who had invested in WWP’s bonds. White was named to a committee that was charged with reorganizing the company’s finances, a task that was completed by 1897. White’s plan for reorganization gave shareholders the option of paying a $10 per share assessment against their stock or returning 40 percent of the shares they held. Also, in an effort to eliminate the continued rivalry between former competitors now owned by WWP and to consolidate their operations for efficiency and profit, the plan called for all the companies WWP had acquired to be merged into a single entity. Both the structural and financial reorganizations proved to be successful, and the company was able to move into the next century with confidence. In 1900 White was made general manager of WWP and charged with maintaining the company’s financial health. He worked closely with Henry M. Richards, who had succeeded Moore as president, while David L. Huntington, the secretary and superintendent, was responsible for ongoing operations.

By 1900 WWP was the premier owner and operator of streetcars in Spokane. In 1902, however, J. P. Graves formed the Spokane Traction Company and, although the electricity necessary to run the line would be purchased from WWP, he received permission from the city to develop a street railway to compete with the company. WWP’s peak year for streetcar travel was 1910 with nearly 25 million passengers carried, though competition from Spokane Traction Company, as well as the new automobiles and “jitneys” (buses) that were becoming popular, began to erode those numbers. Eventually the Spokane Traction Company was merged into WWP due to increasingly low passenger rates for both companies. In 1931 WWP began to successfully test buses, run by electricity on city-maintained streets, as opposed to streetcars running on rails serviced by the company. The city’s last streetcar ran in 1936, but WWP remained in the transportation business until 1945 when the busline was sold to Spokane City Lines.

WWP expanded its electric service area outside of Spokane in 1901, when it began to provide power service to a railroad yard in Hillyard, Washington. In that same year, the company bought a tract of land in Post Falls, Idaho, on the Coeur d’Alene River, just east of the town of Coeur d’Aleñe, and planned an ambitious 100-mile long, high-voltage transmission line to carry electric power to mines throughout northeastern Washington and northern Idaho. When it was completed in 1903, this power line was the longest high-voltage line in the world. At that time, the company’s total generating capacity was 8,000 kilowatts.

During the next three decades, WWP completed a rapid expansion program that saw its total generating capacity grow from about 8,000 kw to more than 200,000 kw, and the number of plants from one to 14. The added capacity enabled WWP to supply reliable and economical power to dozens of communities reached through transmission line extensions. It also spread the company’s costs over a larger base, resulting in cost efficiencies and system diversity.

The first new plant was added in 1906 at Post Falls when three 2,250-kw units went on line. The following year, the company began operation of its first steam-powered generating station, the Ross Park Steam Plant. Fueled by coal, the 5,000-kw-capacity plant was operated only rarely, being designed primarily for emergency use when water was low. In 1910, WWP completed the 15,000 kw Little Falls Plant, which increased the company’s total capacity by almost 50 percent.

By this time, the company was already at work on an even larger project on the Spokane River—Long Lake. When completed in 1915, the Long Lake project, with an original installed capacity of 25,000 kw, again increased WWP’s total capacity by half to almost 80,000 kw. The Long Lake project included spillways that were 170 feet high—the highest in the world at the time—that powered the largest generating turbines then in use. By 1919, the company expanded Long Lake by 27,500 kw. The Long Lake plant allowed WWP to put the Ross Park Steam Plant out of service in 1916, and the company did not undertake steam generation again until 1971.

In 1922, WWP added another 10,000 kw with the construction of the Upper Falls facility, the first vertical-designed unit on the company’s system and one of the first installed in the West. During the next eight years, WWP acquired the Oroville, Nine Mile, Dalkena, Lewiston, Grangeville and Asotin stations. In 1925, WWP acquired the Chelan Power Company from the Great Northern Railway Company. Included in the deal was the site for a generating plant at Chelan Falls. Completed in 1927, the project was the last generating station built by WWP for more than 20 years.

In 1926 WWP began replacing its direct current (DC) in downtown Spokane with alternating current (AC)—although the company continued to use the DC system for its streetcar system. As the economical benefits of AC became apparent to customers, the demand for electricity grew, and the company began touting electrical appliances in addition to the stoves and water heaters already being sold. WWP’s aggressive campaign allowed the company to set records in sales for some of these machines.

D. L. Huntington—who had become president in 1910— retired in 1927, the year before WWP was acquired by American Power & Light Co. (AP&L), a utility holding subsidiary of Electric Bond and Share Company (EBASCO). His position was not filled until 1930, when Frank T. Post was named president of the company. By that time, WWP had built 1,500 miles of transmission lines that carried power to more than 100 towns and cities, and the company’s 14 plants could generate 200,000 kilowatts of electricity.

Post’s term as president of the company was marked by the initial battles between those on either side of the debate over public versus private ownership of utilities. While supporters of public utilities felt that the large private companies had contributed significantly to the 1929 stock market crash and resulting depression, advocates of private utilities believed their opponents were threatening the very principles on which the United States had been founded. Although Post made a valiant attempt during the hearings to convince a Senate committee that WWP and its customers had greatly benefitted from its relationship with a holding company, the Public Utility Holding Company Act was passed in 1935, enforcing the dissolution of those holding companies with utility concerns. Thus began a period of legal battles for control of WWP that spanned nearly two decades.

In 1939, the same year WWP celebrated its 50th anniversary, Post was made chairman of the board, and Kinsey M. Robinson replaced him as president. Robinson had started his career as a wagon driver for Idaho Power Company and worked his way up to the position of president. His relationship with WWP began when Idaho Power was bailed out by EBASCO. The president of EBASCO, S. R. Inch, so impressed with Robinson’s performance, had convinced him to move to WWP in 1938.

WWP received the first of its three Edison Awards— previously known as the Charles A. Coffin Award—in 1940. Other milestones for the company included recognition for having developed electric water heaters, increasing annual residential use of electricity to over twice the national average, and refinancing company debt. With the outbreak of World War II, WWP turned its attention from marketing to helping with war efforts. The company’s sales force began to urge its customers to conserve energy and to repair, rather than replace, electrical appliances. WWP also aided the cause by selling war bonds, instituting scrap drives, and planting victory gardens, and it was a major supporter of the drive to build a bomber repair facility nearby.

The end of World War II brought new surges in demand for electrical power, demand that WWP was not prepared to meet. The company undertook such temporary measures as increasing storage on Coeur d’Alene Lake, raising the flashboards on several of the dams, deepening the tailrace at Chelan, and increasing the height of Long Lake. WWP could not stem the rising tide of demand with these attempts and desperately needed to increase its level of generation. By the end of the 1940s, the company found itself engaged in not one, but two battles—the first to build new generating capacity, and the second to remain an investor-owned utility.

As the 1950s began, public utilities were gaining more ground, and WWP was beginning to suffer as a result. Therefore, AP&L decided that it wanted to cut its losses and divest itself of WWP, even if the company had to be sold to a public utility district (PUD). However, WWP’s board of directors, including Robinson, who had been named chairman after Frank T. Post, felt that the public utility tide was turning and wanted to continue the fight. AP&L president Howard Aller simply replaced all the board members except Robinson with AP&L directors and kept further negotiations for the sale of the company under wraps. It wasn’t until copies of the contracts inadvertently landed at WWP that Robinson became aware of AP&L’s intentions. This glitch in Aller’s plan allowed Robinson enough time to rally the support of some Spokane businessmen who were then able to get a restraining order to temporarily prevent the sale.

The case was tried in March 1951. The decision handed down made it clear that the sale of WWP could not be legal because the company had interests in several states, and PUDs were not able to own property in states other than the one in which they operated. In 1952 a new board of directors was formed consisting of members selected by both WWP and AP&L. Shares of WWP stock were distributed to AP&L stockholders, and for the first time since William A. White rescued the company from bankruptcy in 1895, WWP was on its own.

While the ownership battle was being fought out on the front, the company was aggressively moving to resolve the power supply problem. In November of 1950 the company filed with the FPC for a license to build the Cabinet Gorge Dam on the Clark Fork River in Idaho. With the licensed approval in just two months, WWP worked around the clock to bring the first of four 50,000-kw generators on line in less than two years. When completed in 1953, the Cabinet Gorge Dam nearly doubled WWP’s generating capacity. The company then began working on an idea it pioneered— joint ownership of power projects—that allowed it to benefit from new endeavors without taking sole responsibility for the total project. In 1954 WWP, together with several other utility companies, participated in a joint venture—formed as the Pacific Northwest Power Company (PNP)—in order to develop a site on the Snake River between Idaho and Oregon. After a 20-year effort, the bid to develop the project was denied.

In 1956 the Spokane Natural Gas Company began competing with the WWP for cooking and heating customers. WWP entered the natural gas utility business two years later when the company purchased its competitor for $20.5 million. That investment, and the 13,000 customers it acquired through the deal, would double for WWP by the end of the 1960s.

Construction on the Noxon Rapids generating site, just a few miles upstream from Cabinet Gorge, was completed in 1959 when three units went online. An additional unit was added in 1960 and yet another in 1977, for a total of 554 MW. Unbeknownst to the company at the time, this plant proved to be the last major hydro generation site built by a private Northwestern utility and the last in the country built by a utility not involved in a joint project.

In 1960 George Brunzell took over Kinsey Robinson’s duties as president of WWP, allowing Robinson to concentrate on his duties as chairman of the board and president of PNP. During the early 1960s the company, as a part of PNP or on its own, became involved in several joint projects with local public utilities. This in turn led to ventures with regional and, ultimately, international concerns. When WWP contracted, in 1963, for ten percent of the output of a nuclear reactor to be built by a consortium of public utilities—including those from the province of British Columbia in Canada—it marked the first time since 1917 the company had not depended entirely on hydro power.

In addition to entering the nuclear power field, the Washington Irrigation & Development Company, a WWP subsidiary, began exploring the option of coal-fired power generation. In 1967 the two companies decided to build a coal-fired plant at Centralia, Washington, using coal from fields that lay between the site and Olympia. The Centralia Steam Electric Generating Plant, of which WWP is a 15 percent owner, came on line in 1971. At the same time, WWP was vigorously promoting the use of natural gas, increasing its service area each year.

When Wendell J. Satre took over as president for the retiring George Brunzell in 1971, the company’s future appeared to be a bright one. It wasn’t long, however, before the 1974 oil embargo by the Organization of Petroleum Exporting Countries (OPEC) was causing a serious energy shortage. The accompanying rate increases and growing environmental activism, combined with a staggering economy and several years of low rainfall, succeeded in driving up the company’s costs while cutting its profit.

Barely having recovered from the energy crisis of the 1970s, WWP was faced with a financial setback in the 1980s that had far-reaching effects and called into question the security of bonds issued by public utility companies, which were previously considered one of the most sound financial investments. Described as one of the largest financial crises ever faced by an American industry to that time, the situation was brought about by an ambitious plan by the Washington Public Power Supply System to build five nuclear-powered electric generating plants. The plan was based, in part, on efforts to diminish dependence on foreign oil, as well as the consortium members’ desire to avoid power shortages while finding new sources of fuel for electric power generation.

WWP was one of several privately held utility companies to make huge investments in the nuclear plant projects in the late 1970s and early 1980s. Trouble had begun by 1983 when the utility commissions in Washington and Oregon, the states where the power plants were to be built, had become skeptical of the necessity and profitability of the projects. Satre, who had vacated the presidency in 1982 to be replaced by Paul A. Redmond, found that most of his duties in his position as chairman of the board would involve trying to sort out the mess in which WWP had become involved.

Construction of the Puget Sound Power & Light Company’s nuclear power project in Skagit, Washington, was terminated in 1983, leading to a work stoppage of the consortium’s nuclear power project at Satsop, Washington. Further, the consortium defaulted on two issues of bonds, jeopardizing the entire five-plant project. This left the utility companies trying to recover their significant investments, while faced with rising criticism from the utility commissions. In order to cut losses on all sides as much as possible, Satre delayed his retirement to direct negotiations, finally completed in 1985, between the consortium, the commissions, and several other privately held utilities involved in the venture. In the end, the company and Bonneville Power Administration reached a settlement related to the suspension of construction of the Satsop project. Under the settlement, WWP started receiving in 1987 power deliveries from Bonneville in proportion to the company’s investment in the Satsop project. In total, the settlement cost WWP a $56.1 million write-down on its investment in the Satsop plant, which was eventually mothballed, and increased costs for credit. These setbacks, coupled with low streamflows and a warm winter in 1987, put WWP into a precarious financial position, as well as at risk of a hostile takeover, and precipitated a restructuring of the company that included a cost-cutting drive and the elimination of 206 people from its work force in 1988. In spite of these difficulties, WWP still managed to pay its shareholders their full dividend.

Redmond became chairman of the company in 1988, and was succeeded as president by James R. Harvey. As the company prepared for its centenary year, WWP moved to resume its aggressiveness in seeking growth. A step forward was made in 1989 when the company acquired Northwest Telecommunications Inc. of Spokane, broadening its involvement in providing utility services, while utilizing some of the company’s existing capacity for microwave transmission. Then in 1991, WWP acquired natural gas properties in Oregon and Northern California from CP National Corporation. This added 63,000 new customers to the company’s gas interests. In addition, WWP began concentrating efforts on improvements to its plants and aggressive marketing techniques. Although WWP has not yet returned to the level of earnings it achieved before investing in the nuclear plant project, the company has, once again, achieved financial stability.