Washington Gas Light Company Business Information, Profile, and History

Company Perspectives:

Washington Gas Light Co.'s mission is to "provide the best energy value&mdashø be the customers' choice for energy, profitably offering all products and services at competitive prices."

History of Washington Gas Light Company

Washington Gas Light Company provides natural gas to the metropolitan Washington, D.C., area including segments of Maryland, Virginia, and West Virginia. It has provided gas service to customers in the District of Columbia since 1848 and has grown with the capital city as it changed from a sleepy southern town to an international metropolis. For Washington Gas Light (WGL), this meant acquiring smaller regional gas companies and broadening service to surrounding states as the population grew and suburbs extended. By 1996, more than 770,000 natural gas customers were served in Maryland (43 percent), Virginia (33 percent), West Virginia (two percent), and the District of Columbia (22 percent).

Formative Years

On July 8, 1848, four days after the cornerstone was laid for the Washington Monument, Washington Gas Light Co. received its charter from Congress. About 45,000 people lived in the rough hewn capital city with its chronically muddy streets and lackluster infrastructure. A few buildings were lit by gas produced by an apparatus fired by wood or coal that created water carbureted hydrogen gas. But this gas lighting was confined to large institutions such as Georgetown College, theaters, and a few hotels.

Washington's citizens were jealous of their counterparts in Baltimore and Philadelphia where gas lighting was available in many neighborhoods. To some extent, throughout its history, the administration of Washington, D.C., has been under the aegis of Congress. In order to effect change, Washington's citizens had to petition Congress to bring gas light to the city's streets. Though groups appealed to Congress several times during the 1840s, they did not meet with success.

Then in 1847, James Crutchett, an entrepreneur who had demonstrated gas lighting in Cincinnati, Wheeling, West Virginia, and other cities, proposed that Congress pay him to light up the Capitol and its grounds with gas. Crutchett's Capitol Hill gas lighting project was a success, but it was Benjamin B. French, Chief Clerk of the House of Representatives and friend to at least two Presidents, who had the connections to organize a gas company for Washington. French and a group of prominent local businessmen bought Crutchett's patent rights to produce gas and took over the business of supplying gas light to the Capitol. From there it was a short step to achieving incorporation and the Congressional charter. Washington Gas Light Company was thus the first Congressionally chartered gas company and is the first public utility so chartered that is still in operation.

During the 1850s, improvements and modern conveniences were introduced in this "gas light" era. But while street lights were installed in a few showcase neighborhoods where homes were illuminated, other districts remained dark and primitive. Running water and sanitary facilities were sparse, farm animals were penned in the alleys and grazed in the city's open spaces. Transportation was happenstance.

George W. Riggs, who had founded the Corcoran and Riggs bank with William W. Corcoran, become president of the WGL company in 1856. Riggs was a powerful, well-connected Washingtonian with the resources and allies to expand the fledgling gas company. In 1858 the West Station Gas Works were constructed at 26th Street and G Street N.W., while the company headquarters were at 514 Eleventh Street N.W. just above Pennsylvania Avenue. In 1860, the city corporation established the office of gas meter inspector and sealer, bringing public utility regulation under local authority.

With the outbreak of the Civil War in 1861 came disorder and heartbreak along with growth and activity. Troops were bivouacked on their way to the battlefields, purveyors of goods and services to the army flocked to the city. The work force expanded to support the military. The city experienced a brush with the Confederate forces when General Early's troops were engaged at Fort Stevens, but Washington itself was not burnt or bombarded. Parallel to the difficulties experienced by the city and the nation as a whole, a coal shortage during the war caused WGL's costs to increase, even as Congress reduced the gas rate by 17 percent.

President Grant in 1869 made the District of Columbia a Territorial Government, giving it a governor and council, a house of delegates and a delegate to Congress, a short-lived privilege that ended in 1874 when Congress established the Commission Government, putting the city more squarely under Congressional authority. Meanwhile WGL continued to expand and built a new headquarters at 413 Tenth Street N.W.

When Thomas Edison's invention, the incandescent lamp, hit the marketplace in 1878, the gas light industry considered it a serious competitive threat. The United States Electric Lighting Company of Washington tried to install electric lights along Pennsylvania Avenue in 1881, but just as gas lighting concerns had a difficult time getting established in the city, electric lighting was held at bay, and gas street lighting endured for several more decades. In 1888, WGL constructed its East Station Plant at 12th Street and N Street S.E. along the Anacostia River. Construction was seriously hampered by the marshy ground; walls would collapse and disappear into the river.

At the turn of the century, WGL had more than 54,000 gas meters in a thriving city of 330,000 people. Intending to secure a future site for a gas manufacturing plant, during 1913 WGL bought Analostan Island, in the Potomac River. The same year brought regulatory change. The Public Utilities Commission was created for Washington, D.C.; Congress would no longer directly regulate the city's utilities.

The First World War brought food rationing, fuel and labor shortages, even before the United States entered the war in 1917. During W.W. I, WGL expanded, by purchasing Rosslyn Gas Company in northern Virginia and adding it to the controlling interest already held in The Georgetown Gaslight Company. The expansion may have been too hasty, however. By the early 1930's, WGL was divesting real estate, selling Analostan Island to the Theodore Roosevelt Memorial Association and unloading the parcel of land that had been the Maryland Avenue Plant, a possession held since 1851.

The New Era

On January 31, 1931, President Hoover signaled from the White House to turn on a giant valve at the WGL's East Station Plant to open the current of natural gas flowing from Kentucky and West Virginia. This gas was mixed with manufactured gas and distributed to customers. The New Deal brought population expansion which further intensified during World War II. Gas main lines were extended to Rockville, Maryland, nearly 20 miles out of the city. With the direct pipelines to the Appalachian region, thousands of new customers could be provided with gas. WGL grew out of its office building and purchased land at 11th Street and H Street for a new headquarters. Even through the years of the Great Depression, in fact during the first hundred years of the company's history, WGL sustained dividends every year since 1866.

From the beginning, WGL manufactured gas using a variety of methods. At first, the company made rosin gas. Later on, coal gas, oil gas, and carbureted water gas was processed until the introduction of natural gas in 1931 when gas from the Appalachian region became available to the Washington, D.C. area. Carbureted water gas was made by passing steam through hot coke or a mixture of coal and coke, then by adding oil gas, the water gas was enriched or carbureted. After World War II, natural gas supplies were augmented by sources of Texas gas sent via pipelines built or improved for war time emergency oil supply. During 1946-47, WGL adapted all customers' gas appliances to use natural gas, an enormous task involving some three million gas burners of domestic and commercial appliances.

From the post-W.W. II era onward, through the turbulent 1960s, Washington, D.C. enjoyed a steady population growth. In 1963, WGL's long term attempt to establish underground storage facilities for its natural gas came to a head. Land had been acquired in Brandywine, Maryland, in Prince George's County, an area that was then sparsely populated. The company wanted to stockpile gas purchased at uniform low rates for use during periods of peak demand. Safety concerns by residents close to the proposed site inflamed the legislative debate which turned on increased tax revenues for one county and threatened property values in a neighboring county. The underground storage project was stymied. During the summer of 1963, WGL announced a plan to acquire and operate a natural gas field in Hampshire County, West Virginia, some 125 miles northwest of Washington, D.C., and far from the safety concerns of suburban homeowners. The gas field would be owned by a new subsidiary, Hampshire Gas Co., with a view to providing gas to customers during the ever increasing demand, especially for winter peak loads.

Conservation efforts during the 1970s energy crisis and the usual customer attrition rate meant that less gas was being sold. As the economic times were inflationary, labor, construction, and interest costs were spiraling. Gas prices doubled from 1974 to 1977 and utility bills hit the ceiling. So did customers. But even during these tumultuous times, WGL continued to raise dividends for investors.

Competition in the 1980s

The 1980s ushered in an era of rapidly rising commercial and residential real estate values to the Washington, D.C. area. Construction boomed, but many of the new houses were designated for electric heating. WGL survived a series of potentially destructive events during this time--aggressive competition from the electric industry, changes in regulatory policy, and labor strikes.

In August 1985, aiming to improve competitiveness in the energy market, WGL created company divisions to serve Maryland, Virginia, and the District of Columbia. By decentralizing, the company hoped to counter heavy competition from aggressive electric companies promoting the merits of electric heat pumps for low cost home heating and from the oil industry which had been in a price slide.

Intending to stimulate competition and produce lower gas prices for consumers, federal energy regulators in the fall of 1985 changed policy regulations and established a voluntary rule requiring pipelines that had previously been buying and selling natural gas as well as transporting it, confine their activities to transporting the gas. In theory, this move would allow gas distribution companies such as WGL to purchase cheaper gas produced far away and pass the savings along to their customers. But large volume gas users such as hospitals and government agencies then sought avenues to cut their own deals with the producers, bypassing the local distributor, WGL.

In June 1986, 1,250 employees enrolled in the International Union of Gas Workers struck at WGL, the company's first strike in 25 years. Excessive overtime was the complaint, caused by staffing reductions, a policy the company had been implementing since 1982. Labor strife occurred again in 1995 when members of the International Union of Gas Workers objected to new contract terms that would allow the company to hire part time workers. A lockout of 109 days marked the acrimonious period.

Relations with the community, however, continue to be cordial. The Washington Area Fuel Fund initiated by WGL has raised $9 million since its inception in 1983 to provide fuel for poor families. Other community based programs supported by WGL included fixing up homes for senior citizens and disabled people, health care for needy children, and programs aimed to reduce infant mortality, a significant health problem in the District of Columbia.

The 1990s and Beyond

During the 1990s, the effects of deregulation of electric and gas utilities began to trickle down to the consumer level. The Federal Energy Regulatory Commission rewrote merger regulations, opening the utility company arena to acquisitions and mergers involving offshore and out of state utility companies. New entries in the gas utility business turned the heat up on WGL. Consolidation, improved marketing strategy, and focusing on new markets characterized WGL's response.

In the mid-1990s, competition was focused between natural gas and electricity in the lucrative residential market, the primary source of the company's net income. While WGL continued to enjoy a price advantage over electricity, the entry into the marketplace of other natural gas providers posed a threat to WGL's monopoly. During the fall of 1996, thousands of residents in Montgomery and Prince George's counties (suburbs of Washington, D.C.) received the option of buying natural gas from a supplier other than WGL, under a two-year pilot program ordered by state regulators. Horizon Energy, Broadstreet Energyone, and BNG, Inc. offered savings plans, guaranteed caps on gas charges, rebates, and cash advances to lure customers from WGL.

As the electric utilities jostled for increased market share, WGL expected increased competition from that quarter. In an effort to garner some of the electricity market themselves, early in 1997, WGL announced that if regulators permitted, the company planned to market electricity to consumers in the Washington, D.C. area, using transmission lines of existing distribution companies. Fuel oil was also a noteworthy competitor in areas where clients required alternate fuel sources during peak demands.

During this time, WGL obtained the natural gas to meet its customer requirements through 13 long-term gas supply contracts scheduled to expire between 1998 and 2004. During periods of peak demand, such as the winter of 1996 when the Washington, D.C. area experienced record cold spells, WGL acquired extra gas supplies as needed, sometimes at higher prices than standard contracts. About 70 percent of WGL's gas supplies were transmitted through facilities of Columbia Gas System, a Reston, Virginia, based natural gas company that in 1997 announced plans to construct a pipeline to carry natural gas from western Canada, the Gulf of Mexico, and the Rocky Mountain region. These additional gas supplies were expected to help moderate prices in the future. With service agreements with eight interstate pipelines, WGL bought natural gas from more than 60 suppliers. Gas was also acquired under seasonal contracts or spot market purchases.

Another WGL savings strategy was to shift a certain amount of service and installation work to independent contractors. Consumer complaints about unsatisfactory, and at times unsafe, contractor work increased during the mid-1990s. In response, Washington Gas Watch: A Coalition to Protect the Public was established in 1997 by a group of community organizations to monitor contractors who work for WGL.

James H. DeGraffenreidt, Jr., president and chief operating officer of WGL, predicted in a late 1996 interview with American Gas that in the Company's future "you will see continuing trends in consolidation.... You will see innovations, primarily in information technology, that will make it possible for customers to take greater control over the multiplicity of services." Indeed, throughout the last half of the 1990s, WGL was faced with transforming itself into a more consumer-oriented utility. Several new gas suppliers had entered the Washington, D.C. suburban marketplace. Competition required rethinking corporate marketing strategy. Winning back customers who switched to one of the other gas suppliers--EnergyOne, Enron, Horizon and BGE--was one aspect. Persuading customers who used another energy source to switch to gas was another strategy to improve market share. Moreover, since a competitive marketplace demands a responsive organization, WGL encouraged employees to work with greater autonomy to achieve objectives. Efforts to consolidate were underway. In 1996, Frederick Gas Company was merged into the parent company.

Principal Subsidiaries: Crab Run Gas Co.; Hampshire Gas Co.; Shenandoah Gas Co.; Advanced Marketing Concepts, Inc.; American Environmental Products, Inc.; Brandywood Estates, Inc.; Davenport Insulation, Inc.; Universal Insulation, Inc.; Washington Gas Energy Systems, Inc.