I’m not going to write about Enron. I promise. But the whole sorry mess did inspire me to begin reading “The Merchant of Power,” by John F. Wasik, a book about Samuel Insull and Thomas Edison.
Sam Insull was the premier financier-entrepreneur of his time, writes Wasik, the man who took Edison’s basic idea of generating electricity at central stations to thousands of cities, making the modern metropolis possible. Besides being the financial mind behind our power grid, he was also, according to Wasik, a tyrant and a scoundrel.
Insull was one of the richest men in the world at the height of his career, but when his utility holding companies folded in 1932 his empire collapsed. It was the largest business failure of the era and thousands of investors lost everything. Insull faced charges including embezzlement and bankruptcy fraud, but he was acquitted time after time.
Thanks to Insull’s financial chicanery, modern securities and utility regulations were put into place. And it’s to Insull’s house-of-cards holding company structure that we owe the passage of the Public Utility Holding Company Act.
“The holding company structure allowed Insull to control company assets of $500 million in 32 states and 5,000 communities with only $27 million,” explained Wasik. “It was such a profitable entity that the number of holding companies increased from 102 to 180 between 1922 and 1927, while the number of subsidiary operating companies fell from 6,355 to 4,409.”
By 1932, eight holding companies controlled 75 percent of the investor-owned utilities.
(Mega-mergers anyone? Raptor vehicles? If I was going to write about Enron-or Montana Power, David Wittig, etc.-it’s here that I would muse cynically about how odd it is to repeal PUHCA at a time when we might be better advised to shore it up.)
But it was the nuts and bolts of the story Wasik told that captured my imagination. Think about interior lighting. Gaslights, besides possibly exploding, could asphyxiate the unfortunate occupants of a building if the flame went out. Imagine the environment. Cities “reeked of horse excrement” because horses provided most of the transportation. Street cleaners in Manhattan picked up three million pounds of manure every day. Coal-stoked fires released poisonous smoke everywhere. Urban skies were a hazy brown, and grime and soot blanketed the streets.
Then Edison built the Pearl Street station. It was the first central power plant, the beginning of the modern electric utility industry: central power generation, safe and efficient distribution, at a price that competed with gas lighting. Can you imagine the 27-ton “jumbo” dynamos Edison powered up? Each one produced 100 kilowatts. The Pearl Street plant needed six of them to light up the square mile of New York City it serviced.
Then there was the challenge of undergrounding the network of “conduits” needed to deliver the energy to customers-“copper wire in iron pipes, surrounded by cardboard, asphalt and linseed oil”-because Edison wanted no part of the jungle of wires that dangled above the city streets. How about tracking energy consumption in a pre-meter era?
On Sept. 4, 1882, current flowed out of Pearl Street station and 400 light bulbs lit up. In no time at all, 300 plants were in service across the country. To commemorate Edison’s remarkable achievement, in 1917 the New York Edison Co. installed a plaque at the original Pearl Street site.
I just had to see it.
I started looking for the plaque at one end of Pearl Street, in lower Manhattan. No luck. I was on the wrong end of Pearl Street, a policeman told me, but that was good news. At least it still existed.
I hiked past the edges of China Town, past the South Street Seaport, all the way to the end of Pearl Street. I scoured every inch of wall and sidewalk. No plaque. Finally I came across an interesting little hole-in-the-wall museum. A friendly guide-type person came out and asked me if I needed help. “Edison’s Pearl Street station plaque? Sure. It’s at 40 Fulton Street.” Of course.
Back I walked, back to Fulton Street, past all the other plaques I had discovered along the way. New York, apparently, is full of plaques. Edison’s Pearl Street plaque at 40 Fulton Street was absolutely magnificent. It looked as if it had just been polished. It looked like someone really cared about it.
It was a good trip and worth the effort. Frankly, I like thinking about engineers and the engineering stuff they do. Engineers are good for my spirit. I find comfort in knowing they’re in the works somewhere and that the world doesn’t just revolve around the manipulators and hustlers. In my mind, making power is still more important than taking it.