Connecticut Light and Power Co. - Company Profile, Information, Business Description, History, Background Information on Connecticut Light and Power Co.

107 Selden St.
Berlin, Connecticut 06037-1616

History of Connecticut Light and Power Co.

Going into the mid-1990s, Connecticut Light and Power Co. (CL&P) had been the largest utility in that state since 1927. At the end of 1993, the company was providing electric service to over one million customers in 149 Connecticut cities and towns. Its generating capacity of 5.292 megawatts came from a combination of steam, internal-combustion, hydro, gas-turbine, nuclear, and pumped-storage plants. Connecticut Light and Power became a wholly owned subsidiary of newly formed Northeast Utilities in 1966.

J. Henry Roraback, a lawyer, laid the foundations of the future company, when he lobbied the state legislature to pass a special act chartering the Rocky River Power Co. in 1905. This charter gave Roraback sole power rights to the Rocky River, a tributary of the Housatonic River. A 1909 amendment gave Roraback permission to distribute power wholesale throughout the state, to construct dams on a stretch of the Housatonic in northwestern Connecticut, and to build mills and manufacturing plants in the same area. Roraback's political influence grew even greater when he became chairman of the state Republican party in 1912, a position he held until his death in 1937. Between 1915 and 1931, the party controlled both the legislature and governorship and virtually every Republican candidacy had to be cleared with "J. Henry." A big, forceful, mustachioed man who resembled the popular depiction of a political boss, Roraback actually denied the renomination of two Connecticut governors.

Roraback's power company was inactive until 1917, when he secured financial backing from a large Philadelphia-based utility holding company, the United Gas and Improvement Co. (UGI). UGI bought the Housatonic Power Co. from the New York, New Haven & Hartford Railroad Co. After this acquisition, the Rocky River Power Co. purchased all franchises, leases, and properties of the Housatonic Power Co., the United Electric Light and Water Co., and the Seymour Electric Light Co., changing the name of the combined companies to the Connecticut Light and Power Co. Roraback's financial backer UGI held a controlling interest in the new company. Roraback, originally a vice-president as well as a stockholder and director, became president of the company in 1925.

CL&P's first development project was to build the Stevenson dam and hydroelectric plant on the Housatonic. Completed in 1919, it impounded what came to be called Lake Zoar. That same year, the Connecticut legislature gave CL&P the right to divert water from the Housatonic back into the Rocky River, where it could be dammed and stored for release in periods of low water flow. The subsequent reservoir was named Lake Candlewood and became the state's largest body of water.

By 1918, CL&P had already established itself as the second largest utility in Connecticut. In succeeding years, the utility sought to expand its markets, which resulted in the construction of an enormous new steam plant in Devon, about three miles from the Housatonic's mouth, in 1924. After three years had passed, CL&P became the leading utility in Connecticut, with $8.3 million in operating revenues, compared to $2.6 million in 1918. Part of this growth was due to acquisitions or mergers with smaller power companies, which ultimately enabled CL&P to broaden its scope from the western part of the state into central and eastern Connecticut. A holding company, the Connecticut Electric Service Co., was created in 1925 to separate the retail aspects of the business from the power generation and wholesale elements of the business.

By the end of 1929, CL&P was supplying electricity to 60 cities and towns in Connecticut with an estimated population of 481,651. The utility also furnished electric current to other public utilities for sale in 26 towns with an estimated population of over 193,000. Also by this time, gas service had become possible after the company received sweeping authority from the state legislature to lay mains and pipelines for this purpose. Eventually, CL&P provided gas directly to 10 towns with a population of about 161,000 and supplied gas to other utilities. In all, the company owned 12 plants by the end of the 1920s. Dividends which were first paid out in 1927 continued from that date without a break.

Operating revenues of $14.6 million in 1929 continued to grow steadily even during the Depression, reaching $19.7 million in 1939. Net income, which was $3.8 million in 1929, gradually rose to $4.2 million in 1939. Electric output rose from 580.4 million kilowatt hours in 1919 to 625.9 million in 1939, while gas output rose from 3.1 billion cubic feet to 4.8 billion during the same ten-year period. The number of electricity customers increased during this period from 112,965 to 168,351, and the number of gas customers from 32,192 to 69,688. Through the course of this decade, CL&P owned and operated 11 electric generating plants and five manufactured-gas plants.

CL&P became an independent company in 1941 when UGI was forced by federal legislators to divest itself of its holdings outside Pennsylvania. By 1948, the utility was serving a population of about 715,000 over an area of about 3,455 square miles. It owned and operated 24 electric generating plants as well as its five gas plants. In that year CP&L applied for and received its first rate increase since 1920. Between 1918 and 1949, the electricity rate per kilowatt hour had fallen from an average of 10.04 cents to an average of 3.3 cents. In the meantime, the average annual household consumption of electricity increased more than ninefold during this period.

Construction of a new CP&L headquarters building was completed in 1952, replacing offices in Hartford and Waterbury. Three years later, the company opened Shepaug, its largest electricity generating plant to date. Lake Lillinonah was created from water backing up behind the plant's dam and, like Zoar and Candlewood, became an area for public recreation. In 1956 the company became the first utility to order an IBM 7070 "electronic brain," using this early computer as the heart of its newly created data-processing department.

In 1958, CL&P owned and operated 36 electric generating units. By this time, manufactured gas had been replaced largely by natural gas, leading to the development of production plants for reforming natural gas in Norwalk and Waterbury and propane-air standby plants in five other communities. The utility continued to thrive in the mid-1950s, serving 853,000 people and taking in nearly $75 million, with a net income of $11.3 million. Having joined 11 other New England utilities in 1956 to build an experimental 134,000-kilowatt nuclear power plant in Rowe, Massachusetts, CP&L received 15 percent of its output when operations began in 1961.

In 1966, CL&P was serving a population in excess of 1,382,000 over an area of about 3,641 square miles. It owned and operated 39 electricity generating plants and was part of a consortium constructing Connecticut Yankee, a 490,000-kilowatt nuclear power plant in Haddam, Connecticut. A wholly owned subsidiary, Connecticut Gas Co., was providing natural gas in 12 service areas, while a mixture of natural and manufactured gas was being distributed in five communities and propane-air standby plants in eight others. During this period, operating revenues rose to a healthy $122.8 million, and net income stood at $20.5 million.

1966 witnessed the creation of Northeast Utilities to serve as a utility holding company consisting of Western Massachusetts Co., Connecticut Light and Power, and Hartford Electric Light Co. This consolidation was the latest step in a history of cooperation between these companies dating back to 1925, when the three utilities first engaged in joint power-pooling and long-range planning. CL&P's chairman and chief executive officer, Sherman R. Knapp, became president and chief executive officer of Northeast Utilities. Of the three original companies in Northeast Utilities (NU), CL&P was by far the senior partner. At the beginning of the 1980s, for example, its common stock was valued at $478.9 million, 51 percent of the nearly $931-million value of the NU common stock held by all of NU's subsidiaries.

The Connecticut Yankee project was completed in 1968, with CL&P holding 34.5-percent ownership in the nuclear power plant. A second nuclear plant completed in 1970 at Millstone Point, on Long Island Sound near Waterford, Connecticut, was entirely owned by NU and 81 percent by CL&P. These plants made NU the world's largest producer of nuclear-generated electric power.

In 1972, about 74 percent of Connecticut's area and 50 percent of its population was being served by NU. Four years later, 81 percent of NU's revenue and a larger part of its income was coming from Connecticut. Relations between the holding company--especially its CL&P subsidiary--and the state's regulatory authorities became of prime importance as energy costs rose worldwide in the wake of the 1973--74 Arab oil embargo. In all, CL&P filed eight rate-increase requests during the 1970s, which generated a tremendous political controversy.

While running for governor in 1974, Democratic party candidate Ella T. Grasso contended that CL&P had overcharged customers by more than $4 million in the last year. Grasso and state consumer groups brought an action blocking the state's Public Utilities Commission from granting CL&P a rate increase of 8.8 percent. After she was elected, the commission was replaced by a Public Utilities Control Authority that appeared to be more consumer-oriented. In December 1976, the authority ordered CL&P (and Hartford) to cut their gas and electricity rates to 1974 levels--a $22 million reduction in place of their request for a $56 million increase.

Under the impact of increased costs, CL&P's net income fell from $73.5 million in 1974 to $57.7 million in 1975, even though electric operating revenues increased from $338.3 million to $364.8 million (compared to only $139.1 million in 1969). In 1979 operating revenues were up to $591.6 million, but net income, at $57.8 million, was barely higher than the 1975 figure.

At the same time that the utility was facing a profit squeeze from being denied a rate increase, CL&P was confronted with heavy expenses from its overreliance on nuclear power. Before high costs arising from the energy crisis encouraged conservation, NU had projected an increase in electricity demand of about seven percent a year until the end of the century. Accordingly, by 1976 NU had sunk more than $1.3 billion--over half of its assets--into nuclear power. This investment included work at Millstone Point on two more nuclear power plants. Millstone II, which like Millstone I was 81-percent owned by CL&P, was completed in 1974. By 1981, NU was obtaining 54 percent of its energy from nuclear power, the highest ratio for a company of its size in the nation.

From a consumer standpoint, NU's heavy reliance on nuclear power made the company's electricity rates the lowest in the Northeast. But the long-range costs for the NU system, and especially for CL&P, threatened to make "Millstone" an apt name. CL&P started paying fees to the U.S. Department of Energy for the disposal of spent fuel in 1983. Through the end of 1993, the company had paid the department $134.5 million for assuming responsibility for this high-level-radiation nuclear waste. A 1992 study estimated that CL&P's share of decommissioning costs for nuclear power plants totalled $801.4 million.

CL&P absorbed Hartford Electric Light Co. in 1982, assuming Hartford's outstanding bonds and other obligations. This acquisition raised the number of CL&P electric generating units to 65. Net income rose almost 50 percent the next year and another 25 percent in 1984, when the company earned $284.2 million--five times the 1979 figure--on operating revenues of $1.76 billion, under three times the 1979 figure. Further, the utility registered a 20.7 percent return on equity that year. However, state regulators, who had authorized only a 15.9 percent return, witnessed this prosperity and subsequently proposed to block the company from billing customers for at least $40 million to $50 million in fuel costs. In 1986, the regulators rejected CL&P's request for a $147-million rate increase and froze rates until the beginning of 1988.

Millstone III, Connecticut's fourth and largest nuclear power plant, was completed in 1986 at a cost of more than $3.8 billion, compared to its original estimate of $400 million. CL&P's stake in this facility was 53 percent. During the same year, CL&P was allowed to increase rates over five years to recover costs. As a result, Moody's Investor Service Inc. upgraded about $1.5 billion of the utility's securities, consisting of first and refunding mortgage bonds, unsecured pollution-control revenue bonds, and preferred stock. CL&P got another break in 1990, when state regulators gave it permission to charge ratepayers for $167 million, or about 60 percent, of its $276.5-million investment in construction of the Seabrook, New Hampshire, nuclear power plant. CL&P held a four percent stake in that facility, which opened in 1990. CL&P also held a 12 percent stake in Maine Yankee's nuclear plant and a 9.5 percent stake in Vermont Yankee's nuclear plant. The Yankee plant in Rowe, Massachusetts, was closed in 1992.

In June 1987, the federal Securities and Exchange Commission ordered NU to divest itself of its natural gas business. As a result, CL&P's Connecticut Gas Co. unit was transferred in mid-1989 to a new holding company formed by NU, Yankee Energy Gas System, Inc. NU distributed to shareholders of record one share of Yankee Energy Gas System for each 20 shares of NU stock. The next year, government regulators again focused their attention on CL&P, this time ruling that the company must greatly expand its conservation efforts. One of the most successful environmental programs that the utility implemented was the free collection of old refrigerators and freezers which consumed extremely high quantities of power. In the period between 1990 and 1994, more than 49,000 refrigerators and almost 11,000 freezers were collected in Connecticut and western Massachusetts, resulting in the recycling of almost 11 million pounds of metals and several thousands of pounds of refrigerants.

An issue of concern among Connecticut residents in the 1990s was the possible harmful effects of electromagnetic radiation from power lines which emanated from CL&P's 243 distribution substations. For example, some residents of Guilford, Connecticut, charged that the utility's substation in their town was responsible for several cases of cancer. This allegation was given significant publicity in a 1990 New Yorker article. However, after an in-depth investigation state officials concluded that there was no correlation between the incidences of cancer and the utility's power lines. Nevertheless, in 1993 when CL&P proposed to make good on a 21-year-old promise to move its Lodge Avenue substation in New Canaan, some residents opposed a planned relocation to a site only 700 feet from a school.

In 1993, CL&P delivered electricity to an average of 1,078,925 customers. Of this total, 39 percent were residential customers, 33 percent commercial, 14 percent industrial, and 11 percent wholesale. Sales, in kilowatt hours, came to $26.1 million, operating revenues to $2.37 billion, and net income to $191.4 million. Long-term debt stood at $1.74 billion. Of CL&P's total generating capacity at the end of that year, 49 percent came from steam, internal-combustion, hydropower, and gas-turbine plants, 37.5 percent from nuclear plants, and 13.5 percent from pumped storage, with most of its storage power deriving from the utility's 81-percent share in a project at Northfield Mountain, Massachusetts.

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Further Reference

Bingham, Harold J., History of Connecticut, Vol. 3, New York: Lewis Historical Publishing Co., 1962, pp. 26--32.Campanella, Frank W., "Balmier Climate: Regulatory Outlook Has Turned Favorable for Northeast Utilities," Barron's, August 16, 1982, p. 40.Campbell, Charles L., Progress and Change: A Brief History of Connecticut's Largest Electric & Gas Company, New York: The Newcomen Society in North America, 1950.Dahill, Edwin McNeil, Jr., Connecticut's J. Henry Roraback, Ph.D. diss., New York: Columbia University Teachers College, 1971.Donnelly, J. Louis, "Economies of Scale," Barron's, April 15, 1968, pp. 11, 27.Nicholson, Sy, "CL&P Co. Prepares for Expanded Power Needs in the 60s," Investment Dealers' Digest, May 8, 1961, p. 32.Pierce, Neal R., The New England States. New York: W.W. Norton, 1976, pp. 189--190.Shenon, Philip W., "Excess Energy: Many Electric Utilities Suffer as Conservation Holds Down Demand," Wall Street Journal, October 8, 1980, pp. 1, 17.Wessel, David, "Northeast Utilities Unit's 20.7 Percent Return Fuels Regulatory Interest and Investor Nervousness," Wall Street Journal, March 27, 1985, p. 63.

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