Manufactured gas commanded the market for lighting in urban areas while kerosene continued to be used in rural areas and towns not hooked up to manufactured gas. Though vulnerable to penetration by natural gas, coal gas was given a new lease on life by the discovery of a technique for making “water gas” by injecting steam into anthracite coal or coke heated to incandescence. This produced a flammable mixture of hydrogen and carbon monoxide that was sprayed with atomized oil (a new market for oil) to increase its heat content to match that of coal gas. Less costly to make than coal gas, water gas had 75 percent of the manufactured gas market by 1900.

While water gas could temporarily hold natural gas a bay, a new competitive threat entered the lighting business, affecting both manufactured and natural gas: electricity. In 1880, Edison rigged Broadway for illumination by electricity and lost no time attacking gas lighting for its odors, leaks, fires, explosions, and transport in “sewer pipes,” ignoring, of course, the risk of electric shock, electrocution, and fires from exposed wires.

In 1882, the Pearl Street generating station provided electricity to 1,284 lamps within one mile of the plant. Edison used existing gas statutes for permission to install electric wiring under streets and set up a system to supply electricity that mirrored gas as closely as possible to make it easier for customers to switch. The gas distribution companies knew that electricity would replace gas for lighting and responded with a two-pronged program to meet the new competitive threat. The first was to shift the emphasis of gas from lighting to cooking and heating and the second was to pursue corporate consolidation to strengthen their position.

As the availability of electricity spread throughout the nation, it did not take long for managers of consolidated gas companies to see the virtue of expanding their merger activities to include electricity-generating firms. The coke by-product from coal gas production could be burned to make electricity and mergers would result in major savings in corporate overhead. The first merger occurred in Boston in 1887, setting the example for the creation of innumerable gas and electric or electric and gas utility companies across the nation. Consolidating gas companies and merging with electricity-generating companies into independent gas and electric utilities further evolved into the public holding company, which owned controlling interests in independent electric and gas companies.

Henry L. Doherty, who started out as an office boy and rose to chief engineer of a natural gas company, formed the first public holding company. Noticing that poorly designed gas stoves were a drag on natural gas sales, Doherty increased gas sales by working with stove manufacturers to improve their product. He switched to marketing, where he was an instant success because of his ability to motivate and lead salespeople, initiating all sorts of promotional activities, and setting high standards of customer service. Doherty then established his own company to provide advice on the reorganization, management, and financing of public utility companies. He began to attract investor interest and in 1910 formed Cities Service Company, the first public holding company. As the name suggested, the company was to serve cities across the nation with gas and electricity and, by 1913, Cities Service controlled fifty utilities in fourteen states.

Cities Service was a model for a much larger public utility empire created by Samuel Insull, who started out as the English representative of a U.S. bank representing Thomas Edison’s interests in London. He ended up working directly for Edison as his private secretary by day and learned the electricity-generating business at the Pearl Street plant by night. He eventually rose to third place in the newly formed General Electric, a merger involving Edison Electric, then to Chief Executive of Chicago Edison, and finally to chairman of Peoples Gas in Chicago, where he managed a corporate turnaround. This string of success led to the 1912 founding of Middle West Utilities and later to Insull Utility Investments, both holding companies for electric and gas utilities. By 1926 Insull’s utility empire encompassed 6,000 communities across thirty-two states, and by 1930 it has grown to four million customers and 12 percent of the nation’s electricity-generating and gas-distribution capacity.

The War Industries Board encouraged the formation of nationwide industrial organizations to carry out its mandate to coordinate the nation’s industrial activities during World War I. Natural gas suppliers responded by combining several predecessor organizations into the American Gas Association (AGA) in 1918 to centralize the exchange of information, set industry-wide standards, and encourage cooperation and coordination among its members. The AGA also represented the industry viewpoint to the public, at Congressional hearings, and before natural gas regulatory bodies. The complete conversion of natural gas from lighting to cooking and heating took place at this time, symbolized by natural gas being sold in units of energy (British Thermal Units – BTU) rather than units of illumination (Candlepower).

Heartland Energy Colorado is one of the top hydrocarbon-based energy providers in the USA. They have many drilling locations throughout the country and remain one of the top producers of US oil & gas companies. For more information on Heartland Energy Colorado, see Heartland Energy Development Corporation online.

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