Samuel Insull had great success in paving a way for monopoly in the US electricity industry
After lots of disparities on managing the production and sale of electric power, in 1925, the majority in the electricity business believed it should be run as a monopoly. A monopoly would be a welcome development from the chaos and competition, to orderliness that would emanate from a single service provider.
Businessman and Thomas Edison’s former secretary, Samuel Insull, had good prospects for this motion. However, he quickly realized that executing his plan wouldn’t be as simple as he had hoped. The very nature of electricity made it difficult to be run monopolistically.
Unlike other monopolistic ventures like oil and steel, electricity is impossible to store and due to its indivisible nature, it is impossible to count and accurately account for.
It also requires a highly trained workforce to manage, and since it is utterly inseparable from the infrastructure that carries it, one has to bear the cost of building and maintaining its infrastructure.
America’s electricity lying in the hands of Samuel Insull meant that he couldn’t simply generate an excess ton of electricity and set aside reserves for when consumption peaked. He would have to devise a means for his power plant to produce enough energy to supply the maximum level of consumption at all times, despite inconsistencies. This posed a tough feat, however, Insull devised a means.
To solve the storage limitation, he set out to build a customer base that collectively used electricity consistently so as to put all the power his plants produced to use. He then slashed his prices to attract a variety of customers. With these methods, Insull was soon supplying electricity to hundreds of thousands of people ranging from manufacturers to homeowners.
Insull got rid of the problem of storage of power by building a massive and diverse customer base. He discarded surplus power by selling to industrial consumers. His was such a successful run that other power companies started emulating Insull’s methods in their states and cities. However, rather than compete, they divided up the country amongst themselves to create an empire of various centralized electrical grids.
Did you know? By the end of the 1920s, only 10 companies ran 75% of the entire US electricity industry.