ML023100351
| ML023100351 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 10/30/2002 |
| From: | Bauer S Arizona Public Service Co |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| 102-04859-SAB/TNW/CJJ | |
| Download: ML023100351 (8) | |
Text
In the last five years, under Jims leadership, El Paso Electric has:
restored investment grade credit quality to its securities, received national awards for operational efficiency, been rated as one of the most reliable utilities in the state of Texas (as measured by standards set up by the state regulatory commission), received local and national awards for community involvement, and favorably resolved a significantly advanced municipalization attempt.
Overcoming any one of these challenges would be worthy of note; overcoming all of them and restoring prominence to the company in each of these vital areas, in just a few short years, is an outstanding achievement. Jim will continue to provide leadership in his new role as vice chairman of the board and will retain his position as chairman of the Executive Committee of the board.
On November 1, 2001, a new era of leadership began with the selection of Gary Hedrick as president and chief executive officer. Garys 25 years of extensive financial and regulatory experience combined with his lifelong knowledge of the communities we serve have prepared him to lead El Paso Electric into the next century and to continue El Paso Electric 2001 Annual Report 1
El Paso Electric 2001 Annual Report El Paso Electric 2001 Annual Report Statements in this document, other than statements of historical information, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, as well as other oral and written forward-looking statements made by or on behalf of El Paso Electric (EPE) from time to time, including statements contained in EPEs filings with the Securities and Exchange Commission and its reports to shareholders, involve known and unknown risks and other factors which may cause EPEs actual results in future periods to differ materially from those expressed in any forward-looking statements. Please refer to EPEs 10-K for fiscal year ended December 31, 2001, and EPEs other 34 Act filings for a detailed discussion of these risks and uncertainties. EPE cautions that the risks and factors in such filings are not exclusive. EPE does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of EPE, except as required by law.
I EE I S & P Electric I S & P Utilities 2001 was a year of celebration for El Paso Electric. We celebrated 100 years of service to the area as well as the beginning of a new era of leadership.
On August 30, 1901, the El Paso Electric Railway Company was created as the electricity provider to about 450 customers in the young, booming city of El Paso, Texas.
One hundred years later, El Paso Electric is providing 309,000 customers with safe and reliable electric power.
Effective leadership guided El Paso Electric for many of those 100 years. This has certainly been the case over the last few years as El Paso Electric has prospered under the leadership and guidance of former President and Chief Executive Officer Jim Haines.
2001 Performance Highlights
$14.50
$13.20
$9.81
$8.75 Market Price Per Share (year-end) 1998 1999 2000 2001 Earnings Per Share (diluted weighted average)
Common Stock Equity (percent of capitalization)
Financial ($000) 1999 2000 2001 EBITDA 243,158 258,839 257,941 Electric Utility Operating Revenues (net of energy expenses) 458,581 475,644 483,488 Net Income (applicable to common stock) 46,774(1) 58,392 63,659 Total Assets
$ 1,664,436
$ 1,660,105
$ 1,644,439 EBITDA Interest Coverage 3.00x 3.64x 3.90x Common Stock Data Earnings Per Share (diluted weighted average) 0.78(1) 1.06 1.23 Free Cash Flow Per Share 1.94 2.34 2.37 Market Price Per Share (year-end close) 9.81 13.20 14.50 Book Value Per Share 7.36 8.00 8.96 Market To Book Ratio 133%
165%
162%
Price Earnings Ratio 12.58x(1) 12.45x 11.79x Return on Book Equity 10.92%(1) 13.71%
14.77%
Weighted Average Number of Common Shares Outstanding 59,349,468 54,183,915 50,821,140 Number of Registered Holders 5,547 5,257 5,580 Debt and Stock Repurchases ($000)
First Mortgage Bonds Repurchases 83,544 38,848 53,628 Redemptions 36,034 34,571 Common Share Repurchases 3,169,289 5,991,178 2,760,862 Relative Price Performance El Paso Electric vs. S & P Electric and S & P Utilities Indices (3) 12/29/00 - 12/31/01 1998 1999 2000 2001 39%
34%
33%
28%
26%
1997 1998 1999 2000 2001 (1) 1999 results before the effects of unusual and non-recurring items.
(2) Certain prior year amounts have been restated to conform to the 2001 presentation.
(3) Daily closing values for S & P classification system in use prior to 01/01/02.
$1.23
$1.06
$0.78*
$0.75
- 1999 excludes unusual and non-recurring items.
the success enjoyed over the last five years.
It is with great excitement that we look forward to 2002 and beyond. Be assured that El Paso Electric will continue its rich tradition of service to our customers and creating value for our shareholders.
Zach T. White Founder, El Paso Electric Railway Company George W. Edwards, Jr.
Chairman of the Board
El Paso Electric 2001 Annual Report 3
differs materially from the California model. It is too early to tell, however, whether the Texas structure will encounter its own unique set of challenges.
From EPEs perspective, we have several inherent advantages that we believe will work in our favor as we prepare for retail competition in 2006 and beyond. First, we have an opportunity to learn from other utilities as they resolve structural dilemmas and develop a fully operative market. Second, we will continue to use a portion of our significant cash flow to reduce debt and strengthen our balance sheet. Third, as we enter competition, we estimate that nearly half of our assets will remain in the regulated transmission and distribution business, providing a stable base of earnings and cash flow.
Fourth, we operate in an historically high growth area and have a significant market opportunity literally on our doorstep in the form of the considerable energy needs facing the Republic of Mexico.
Finally, we have over 700 MW of nuclear and coal capacity that we believe should be competitive.
The challenges we face are in adapting our company to the competitive landscape after a century of regulation. We will meet these challenges by remembering the lessons from our past - focusing on our core business and taking a conservative approach to both financial and operational management - while relentlessly adhering to our core values of safety, integrity, and excellence in all that we do.
Our pursuit of these business principles and values continued to produce excellent results during 2001. Diluted earnings per common share increased to
$1.27, before extraordinary item.
This performance was significantly enhanced by increases in both demand and prices in the western power market, resulting in profit margins on economy sales contributing approximately 35 percent to net income, after tax, in 2001, compared to 29 percent in 2000. While EPE welcomes these increased sales and margins, there is no guarantee that these conditions will continue at the levels previously experienced. This is especially true given the Federal Energy In 2001, El Paso Electric commemorated 100 years of service to west Texas and southern New Mexico.
Throughout a century of service, EPE has been an active partner in the growth and prosperity enjoyed by the region. Over that time, EPE has remained a vertically integrated utility, producing, transmitting, and distributing electricity throughout its service territory in a fully regulated environment. Now, standing at the threshold of a new century of service to our customers, we, as well as our industry, are in the midst of dramatic and rapid change.
In January 2002, retail competition began in portions of Texas. EPEs service territory, as well as parts of the panhandle and far east Texas, have not yet begun retail competition. In EPEs case, we are currently scheduled to begin a retail pilot program in August 2005, and to begin full retail competition seven months later.
In New Mexico, which comprises approximately 20 percent of our retail business, retail competition is slated to begin in January 2007.
Much remains unsettled regarding the structure and benefits of retail competition.
The model in California, once regarded as the vanguard for effective retail competition, has been abandoned as unworkable.
In Texas, we are in the early months of a structure for retail competition, which most agree with our ongoing goal to reduce debt and thereby strengthen EPEs balance sheet. Of course, common stock repurchases or future reductions in fixed obligations will depend on the comparative economic value of alternative uses of cash.
At $14.50, our year-end closing stock price increased for the sixth consecutive year and produced a one-year return of almost 10 percent. This significantly outperformed the S & P Electric Utilities Total Return Index, which closed down 8.3 percent, and the S & P Utilities Total Return Index, which closed down 30.4 percent.
The Dow Jones Utility Index also closed down 28.7 percent. In October 2001, EPE was included in the S & P SmallCap 600 Index, which had a total return of 6.5 percent for the year. EPE is also included in the Russell 2000 Index, which posted a total return of 2.5 percent for the year.
During 2000 and early 2001, the utility industry saw dramatic increases in the cost of natural gas used to produce electricity.
While EPE was able to pass these increased costs through to its Texas customers, a previous settlement agreement prevented recovery of these increased costs from our New Mexico customers prior to May 1, 2001. EPE filed a petition to recover these increased costs in late April 2001 and was successful in entering into a settlement agreement which allowed for the full pass-through of fuel costs in our New Mexico jurisdiction effective June 15, 2001. Our inability to recover these increased costs in our New Mexico jurisdiction for the first half of the year resulted in an approximate $6.3 million,
$0.12 per share, reduction in 2001 profits. As of today, our regulatory structure in both retail jurisdictions allows for complete pass-through of our prudently incurred fuel expenses.
EPE owns approximately 1,500 MW of generating capacity that, along with some small purchased power contracts to provide adequate reserves, should be sufficient to meet the present and near-term projected electricity needs of its service territory. In 2001, the Palo Verde Nuclear Generating Station supplied approximately 49 percent of EPEs energy mix and operated at an 86 percent capacity factor. EPE, along with the other participants in Palo Verde, recently began discussions regarding the possible replacement of the steam generators at Units 1 and 3.
Those initial discussions indicate that it may be economically desirable to replace the steam generators at those units in addition to the Unit 2 steam generator replacement scheduled for Fall 2003. Replacement of the steam generators would increase the plant output and is essential for the proposed extension of the units operating licenses for an additional 20 years.
Regulatory Commission price caps in the western market, plans for increased generation, and continued softness in the wholesale market.
During 2001, our free cash flow remained strong at $2.37 per share, enabling us to reduce debt during the year by over
$88.2 million. This reduction in debt has decreased annual fixed charges on an ongoing basis by
$7.2 million. We will redeem the remaining $42.9 million of our Series C bonds at maturity in February 2003 with internally generated cash. As a result of our debt reduction plan, EPEs common stock equity increased to 39 percent of long-term capitalization (including current maturities) at year-end, a dramatic improvement from the June 30, 1996, level of 19 percent.
EPE has also utilized its free cash flow to essentially complete the 12 million-share common stock repurchase program started on June 14, 1999. As of January 31, 2002, more than 11.9 million shares have been repurchased for
$133.9 million, including commissions. We estimate that this common stock share reduction added almost $0.07 per share to diluted earnings, before extraordinary item, in 2001. In early 2002, EPE authorized an additional stock repurchase of up to three million shares. EPEs goal is to produce maximum value for shareholders through stock repurchases, in combination
2 El Paso Electric 2001 Annual Report Gary R. Hedrick President and CEO
El Paso Electric 2001 Annual Report 5
2001 Operational Highlights Service Area Operational 1999 2000 2001 Retail GWh Sold 5,866 6,115 6,218 Native Peak (MW) 1,159 1,159 1,199 Customers at Year-End 297,982 303,722 309,221 Employees at Year-End (including temporaries) 1,068 1,037 1,033 Palo Verde Capacity Factor 91%
91%
86%
Generating Capacity Plant Entitlement Fuel Source Energy Mix Palo Verde 600 MW Nuclear 49%
Newman 482 MW Natural Gas Rio Grande 246 MW Natural Gas 32%
Copper 68 MW Natural Gas Four Corners 104 MW Coal 8%
Purchased Power 11%
TOTAL 1,500 MW 100%
A pilot wind project began operating in April 2001 with a capacity of 1.32 MW.
4 El Paso Electric 2001 Annual Report 2001 Electric Utility Retail Operating Revenues (in millions / includes fuel) 2001 Retail MWh Sales 16.44%
34.49%
28.77%
36.54%
33.28%
12.53%
Public Authorities Residential Commercial & Ind. Large Commercial & Ind. Small Public Authorities Residential Commercial & Ind. Large Commercial & Ind. Small 19.07%
18.88%
Wholesale Sales Contracts Imperial Irrigation District of California (IID) 100 MW Firm Capacity 50 MW Contingent Capacity Expires April 2002 Texas-New Mexico Power Co.
Up to 75 MW Firm Capacity Expires December 2002 Military Contracts Ft. Bliss Army Air Defense Center Expires December 2008 Holloman Air Force Base Expires December 2005 White Sands Missile Range Expires May 2009
}
Our commitment to creating value includes evaluating the need to secure additional generation resources for 2006 and beyond. Our conservative operating philosophy is reflected in EPEs commitment to enter the competitive environment with sufficient generation to meet customer needs. Currently EPE is evaluating the need for constructing additional generating capacity against the mandated requirement under the Texas restructuring law that we lose 40 percent of our incumbent residential and small commercial customers. Our current capacity and contracts for power are sufficient to supply our needs through 2005.
This provides us with additional time to thoroughly evaluate our capacity needs in a competitive environment and to contract for, or construct, any needed additions.
EPE will also continue to work to improve customer relationships, which are vital to earning and retaining customer loyalty as we enter the competitive market. For two years in a row, EPE has ranked number one in the two reliability measures reported by investor-owned utilities to the Public Utility Commission of Texas. We have also worked to increase operating efficiencies in other areas. The number of customers served per employee has increased year over year, and the implementation of process improvements at the EPE Call Center, for example, has resulted in better, more timely customer service.
In 2001, kWh sales to the Comisión Federal de Electricidad (CFE), Mexicos national electric utility, were almost twice as high as sales during 2000. The contract to serve 80 MW in 2000 and 100 MW in 2001 of summer load was not renewed in 2002, however, due primarily to the significant slow-down in the Mexican economy. EPEs relationship with the CFE is based on strong operating ties and literally a century of service to the CFE and its predecessors.
We intend to continue partnering with the CFE as it seeks solutions to Mexicos substantial infrastructure requirements.
Corporate citizenship is a responsibility we take very seriously. Contributing to our communities is an express part of our corporate mission statement, and, as such, helps to define our corporate purpose and mold the actions taken by our employees. We believe this community partnership creates real value over time through enhanced communication and collaboration with our customers and communities.
During 2001, our employees contributed over 14,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> of their time to charitable and civic causes and events. EPEs progress in this area is purely a reflection of our employees dedication and contributions and is illustrated by the numerous awards and recognition EPE received over the past year. Of particular note, is the recognition of EPEs 100 years of service by the Texas Senate and House of Representatives. El Paso Electric as well as past President and CEO, James Haines, were honored with the readings of resolutions during the 77th Legislative Session. In these readings, EPE was commemorated for having spurred growth and development of the El Paso and surrounding communities, and for having proven itself to be an industry leader that is committed to serving the areas citizens.
In 1901, El Paso Electric Railway Company focused primarily on electric railcar transportation between El Paso and Juárez, Mexico. Today, our focus is reflected in our mission statement.
El Paso Electric will be a premier electric and energy services company which anticipates and meets the electric energy needs of its customers in the U.S. and Mexico by creating extraordinary value for:
our customers through top quality service at a fair price; our shareholders through exceptional returns; our employees through superior compensation for superior work; and for our communities through outstanding leadership, stewardship, and commitment.
Thank you for your support and continued confidence in El Paso Electric.
El Paso Electric 2001 Annual Report 7
Operating Statistics 2001 2000 1999 1998 1997 1996(a) 1995 1994 1993 1992 6
El Paso Electric 2001 Annual Report Electric Utility Operating Revenues (in thousands):
Retail:
Residential 195,214 184,769 164,524 173,215 172,917 163,742 140,799 149,321 144,365 143,150 Commercial and Industrial, Small 206,815 192,895 175,924 174,729 173,318 163,875 142,981 148,024 143,102 141,039 Commercial and Industrial, Large 70,959 65,687 59,497 62,450 64,468 59,041 48,643 51,452 47,930 49,742 Sales to Public Authorities 93,059 86,957 80,393 82,360 82,278 81,185 69,149 73,732 72,529 71,496 Total Retail 566,047 530,308 480,338 492,754 492,981 467,843 401,572 422,529 407,926 405,427 Wholesale:
Sales for Resale 86,443 70,162 49,441 82,396 83,448 93,737 90,246 102,304 126,187 108,985 Economy Sales 92,452 84,918 32,523 20,167 10,612 11,032 6,681 5,672 3,078 4,982 Total Wholesale 178,895 155,080 81,964 102,563 94,060 104,769 96,927 107,976 129,265 113,967 Other 9,582 11,020 6,076 5,076(c) 4,980 3,981 3,744 4,050 4,433 3,575 Total Operating Revenues 754,524 696,408 568,378 600,393 592,021 576,593 502,243 534,555 541,624 522,969 Number of Customers (end of year):
Residential 276,200 271,588 266,627 260,356 254,348 250,209 245,245 240,368 235,151 228,688 Commercial and Industrial, Small 28,573 27,947 27,274 26,396 25,900 25,304 24,615 23,857 23,338 22,883 Commercial and Industrial, Large 140 133 124 117 115 102 89 80 74 68 Other 4,308 4,054 3,957 3,867 3,811 3,711 3,674 3,470 3,395 3,251 Total Customers 309,221 303,722 297,982 290,736 284,174 279,326 273,623 267,775 261,958 254,890 Energy Supplied, Net, MWh:
Generated 8,181,836 8,706,790 8,392,890 8,586,098 8,186,187 7,920,675 7,439,404 7,018,423 6,625,162 7,330,004 Purchased and Interchanged 951,359 905,770 328,225 478,396 617,651 711,791 584,853 1,051,251 1,416,172 589,288 Total Energy Supplied 9,133,195 9,612,560 8,721,115 9,064,494 8,803,838 8,632,466 8,024,257 8,069,674 8,041,334 7,919,292 Energy Sales, MWh:
Retail:
Residential 1,789,199 1,767,928 1,653,859 1,621,436 1,587,733 1,545,274 1,473,349 1,500,426 1,424,935 1,395,387 Commercial and Industrial, Small 2,069,517 2,026,768 1,943,120 1,891,703 1,834,953 1,779,986 1,754,176 1,721,736 1,616,434 1,555,047 Commercial and Industrial, Large 1,174,235 1,142,163 1,133,751 1,314,428 1,271,449 1,216,941 1,121,329 1,092,028 872,477 911,750 Sales to Public Authorities 1,185,521 1,177,883 1,135,438 1,120,654 1,090,312 1,110,706 1,068,048 1,081,850 1,034,231 997,483 Total Retail 6,218,472 6,114,742 5,866,168 5,948,221 5,784,447 5,652,907 5,416,902 5,396,040 4,948,077 4,859,667 Wholesale:
Sales for Resale 1,460,383 1,282,540 905,975 1,757,880 1,897,885 1,753,553 1,646,357 1,925,671 2,484,128 2,361,204 Economy Sales 929,914 1,714,288 1,497,880 888,708 640,017 757,999 538,102 320,026 164,559 264,654 Total Wholesale Sales 2,390,297 2,996,828 2,403,855 2,646,588 2,537,902 2,511,552 2,184,459 2,245,697 2,648,687 2,625,858 Total Energy Sales 8,608,769 9,111,570 8,270,023 8,594,809 8,322,349 8,164,459 7,601,361 7,641,737 7,596,764 7,485,525 Losses and Company Use 524,426 500,990 451,092 469,685 481,489 468,007 422,896 427,937 444,570 433,767 Total, Net 9,133,195 9,612,560 8,721,115 9,064,494 8,803,838 8,632,466 8,024,257 8,069,674 8,041,334(b) 7,919,292(b)
Native System:
Peak Load, MW 1,199 1,159 1,159 1,167 1,122 1,105 1,088 1,093 997 974 Net Generating Capacity for Peak, MW 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,497 1,497 1,497 Load Factor 64.6%
65.4%
62.5%
63.1%
64.0%
63.4%
61.6%
61.1%
62.1%
62.3%
Total System:
Peak Load, MW 1,425 1,360 1,287 1,439 1,442 1,387 1,374 1,365 1,335 1,302 Net Generating Capacity for Peak, MW 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,497 1,497 1,497 Load Factor 64.1%
64.3%
62.9%
64.3%
64.0%
64.2%
62.0%
63.7%
66.4%
66.4%
(a) Financial data is based on the results for the Predecessor Company for periods prior to February 11, 1996 and the Reorganized Company thereafter.
(b) Excludes unbilled MWh.
(c) Excludes MiraSol revenue of $1,430.
El Paso Electric 2001 Annual Report 9
Shareholder Information Securities and Records The common stock of El Paso Electric is traded on the American Stock Exchange.
The ticker symbol is EE.
EPE and The Bank of New York (BONY) act as co-registrars for EPEs common stock. BONY maintains all shareholder records of EPE.
Shareholder Services Shareholders may obtain information relating to their share position, transfer requirements, lost certificates, and other related matters by telephoning BONY Shareholder Services at (800) 524-4458.
This service is available to all shareholders Monday through Friday, 8 a.m. to 8 p.m., ET.
Address Shareholder Inquiries to:
The Bank of New York Shareowner Relations Church Street Station P.O. Box 11258 New York, NY 10286-1258 Website:http://www.stockbny.com Send Certificates for Transfer and Address Changes to:
The Bank of New York Receive and Deliver Dept.
Church Street Station P.O. Box 11002 New York, NY 10286-1002 Annual Meeting of Shareholders The annual meeting of El Paso Electrics shareholders will be held at 10 a.m.,
Mountain Daylight Time on Thursday, May 9, 2002 at the Stanton Tower, 100 N. Stanton, El Paso, TX 79901. In connection with the meeting, proxies will be solicited by the Board of Directors of EPE. A notice of meeting, together with a proxy statement, a form of proxy, and the Annual Report to Shareholders for 2001, were mailed on or about April 4, 2002 to shareholders of record as of March 11, 2002.
Form 10-K Report and Shareholder Inquiries A complete copy of EPEs Annual Report and Form 10-K for the year ended December 31, 2001, which has been filed with the Securities and Exchange Commission, including financial statements and financial statement schedules, is available without charge upon written request to:
Investor Relations El Paso Electric P.O. Box 982 El Paso, TX 79960 Or Call: (800) 592-1634 E-mail:
investor_relations@epelectric.com Website:
http://www.epelectric.com Maintenance crew replaces street light in Southeast El Paso (1930s) 8 El Paso Electric 2001 Annual Report Officers George W. Edwards, Jr.
Chairman of the Board Retired in 1995. Prior to retirement, President, CEO and Director of Kansas City Southern Railway Company Kansas City, MO Wilson K. Cadman Retired in 1992. Prior to retirement, Chairman of the Board, President and CEO, Kansas Gas and Electric Company, Wichita, KS and Vice Chairman of the Board of Western Resources, Inc.
Topeka, KS James A. Cardwell Chairman of the Board and CEO Petro Stopping Centers, LP El Paso, TX James W. Cicconi General Counsel and Executive Vice President Law and Government Affairs, AT&T Washington, D.C.
Ramiro Guzman President Ramiro Guzman & Associates El Paso, TX James Haines Vice Chairman of the Board Retired in November 2001. Prior to retirement, President and CEO, El Paso Electric Company El Paso, TX James W. Harris Founder and President Seneca Financial Group, Inc.
Greenwich, CT Gary R. Hedrick President and CEO El Paso Electric Company El Paso, TX Gary R. Hedrick President and Chief Executive Officer Terry Bassham Executive Vice President, Chief Financial and Administrative Officer J. Frank Bates Executive Vice President, Chief Operations Officer Raul A. Carrillo, Jr.
General Counsel Board of Directors Kathryn R. Hood Treasurer Helen Knopp Vice President, Customer and Public Affairs Kerry B. Lore Controller Robert C. McNiel Vice President, New Mexico Affairs Seated left to right: Gary R. Hedrick, George W. Edwards, Jr.
Standing left to right: James A. Cardwell, Charles A. Yamarone, Stephen N. Wertheimer, Patricia Z. Holland-Branch, Kenneth A. Heitz, James W. Cicconi, Eric B. Siegel, Michael K. Parks, James W. Harris, Wilson K. Cadman, James Haines, Ramiro Guzman.
Kenneth A. Heitz Partner Irell & Manella Los Angeles, CA Patricia Z. Holland-Branch President, CEO and Owner Facilities Connection, Inc.
El Paso, TX Michael K. Parks Managing Director Trust Company of the West Los Angeles, CA Eric B. Siegel Independent Investor and Business Consultant Retired Limited Partner of Apollo Advisors, LP Los Angeles, CA Stephen N. Wertheimer Managing Director W Capital Management Greenwich, CT Charles A. Yamarone Executive Vice President U.S. Bancorp Libra Securities, LLC Los Angeles, CA Hector Puente Vice President, Power Generation Guillermo Silva, Jr.
Secretary
El Paso Electric 2001 Annual Report 11 El Pasoans conserved electricity during World War II by lighting the streets with kerosene lamps (1940s)
Meter reader Janet Hallsted, Las Cruces (2000) 10 El Paso Electric 2001 Annual Report sparked new interest in El Paso Electric Railway Companys electric lights. Because the company dedicated more and more of its efforts to producing and distributing electricity, in 1925, the El Paso Electric Railway Company changed its name to the El Paso Electric Company (EPE). That same year, EPE was also granted authorization to transact business in New Mexico. Hatch and Rincon, New Mexico, were added to the system in 1928.
Four years later, EPE built the Rio Grande Power Plant and high voltage lines were erected to serve Sierra Blanca and Van Horn, Texas.
1 9 3 0 - 1 9 4 0 The 1930s was a decade of expansion for El Paso Electric.
As Las Cruces and other parts of its New Mexico territory grew, EPE began to sell power up and down the Rio Grande valley from Hatch, New Mexico to Van Horn, Texas and even into Mexico. It operated all the electric trolley and bus services in El Paso, as well as sightseeing tours, an ice company, and two toll bridges.
The Advent of Electricity In 1901, the El Paso Electric Railway Company opened for business, delivering electricity to a few hundred streetlights and about 450 customers.
Owner Zach T. White, wanted the electricity primarily to transform his mule-drawn streetcar business into an electric streetcar business.
These streetcars carried passengers between El Paso, Texas and Juárez, Mexico.
In 1902, he retired the mules for the latest in high-tech transportation electric railcars.
For the next two decades, trolley service dominated the companys business activities.
By 1920, it served 12,000 electric customers, carried 15 million trolley passengers a year, and even ran a special line out to the American Smelting and Refining Company. Industry was growing, attracted by the easy availability of electric power.
Line crews pose with vehicles for department photo (1920s)
History of El Paso Electric Customer Service representative Yvonne Cabrales (2000)
So, in 1924, the El Paso Electric Railway Company made a strategic move, and expanded its focus to the generation and delivery of electricity.
1 9 2 0 - 1 9 3 0 On December 24, 1924, a new street lighting system to illuminate El Pasos business district was turned on for the first time. This event was marked by a public celebration in Pioneer Plaza. Mayor R. M.
Dudley pressed a button that caused the new lights to shine brightly across downtown. A municipal Christmas tree program was begun and the lighting of the Christmas tree in downtown El Paso became a holiday tradition that continues today.
People were becoming aware that electricity could improve the lives of everyone, not just businesses and wealthy customers. This awareness To keep up with all its new customers, the company switched from manual to machine-generated billing the latest in modern business technology.
Agriculture was flourishing as well. Electric pumping stations made it possible to irrigate thousands more acres of farmland, yielding greater harvests of cotton, fruits, and vegetables.
1 9 4 0 - 1 9 5 0 In 1940, general business conditions rose sharply, due in large part to the expansion of Fort Bliss, which increased personnel from 3,500 to 30,000 by July 1941. Phelps Dodge Copper Refinery operated at near capacity as a result of an increased demand for copper.
American Smelting and Refining Company also experienced a profitable year.
As the country geared up for World War II, many EPE employees joined the armed services, and EPE made special financial arrangements for them as a patriotic gesture.
In 1943, EPE sold its transportation and bridge properties and began focusing strictly on the generation, transmission and distribution of electricity. Economically, the city prospered during the war years. Mining, smelting, and refining industries had a record year in 1944, and the farming industry reached
$22 million in revenues, with cotton accounting for two-thirds of the total crop value.
1 9 5 0 - 1 9 6 0 El Pasos economy boomed during the 1950s, too. In response, EPE built a new 30,000 kiloWatt turbo-generator and boiler at the Rio Grande Power Plant. EPE also successfully negotiated a three-year contract with Mexicos Comisión Federal de Electricidad to sell off-peak power to Juárez, Mexico.
El Pasos economy still relied on cotton, copper, cattle, and farming. The city further benefited from the national defense program. The Annual Report to Shareholders for 1953 noted that Fort Bliss, William Beaumont Army Hospital, Biggs Air Force Base, and White Sands Proving Ground (now known as White Sands Missile Range) served as the areas greatest assets and were among EPEs largest customers.
By the end of the decade, El Pasos population was 290,000, and Juárez boasted 260,000. One-third of Juárezs electrical requirements were supplied by EPE. Las Cruces population had reached 29,500.
1 9 6 0 - 1 9 7 0 The 1960s brought changes such as the expansions at both Texas Western College (now The University of Texas at El Paso) and New Mexico State University in Las Cruces, as well as the remodeling of the El Paso International Airport.
Through 1965, demand for electricity grew at roughly twice the rate of the economy. The fast pace could be attributed to the development of electrical appliances, the convenience of electricity, and effective marketing by electric utilities.
1 9 7 0 - 1 9 8 0 The early 1970s heralded the beginning of what would become the energy crisis, and EPE immediately took
Mesilla Valley Electric Company truck (1900s)
Line crews work on EPE distribution lines (2000) 12 El Paso Electric 2001 Annual Report measures to confront the problem by negotiating long-term fuel contracts, increasing fuel storage facilities, and reviewing fuel mix procedures.
EPE also participated in research and development programs for alternate forms of energy production. In 1973, EPE signed an agreement with several other utilities to participate in the Arizona Nuclear Power Project. The feasibility study for the Palo Verde Nuclear Generating Station (PVNGS) began in April 1970. The U.S. Nuclear Regulatory Commission granted a construction permit in May 1976, and construction on the first unit started soon thereafter.
EPE was doing more than searching for alternative forms of energy during this decade.
In 1977, EPE formed a wholly-owned subsidiary, known as Franklin Land & Resources.
Originally formed for the purpose of acquiring real estate for possible power plant sites, Franklin Lands purpose broadened in 1978.
Diversification became EPEs focus in the next decade.
1 9 8 0 - 1 9 9 0 El Paso Electric grew as it diversified through its subsidiaries. EPE also put portions of its interest in PVNGS up for sale. However, by the mid-1980s, EPE was unable to sell any of its interest in PVNGS.
In 1989, EPE was forced to lay off employees for the first time in its history. Additionally, EPE suspended the payment of dividends to its common shareholders. The end of the 1980s also saw EPE discontinuing all of its subsidiary operations.
1 9 9 0 - 2 0 0 1 The 1990s opened with uncertainty and that uncertainty grew when EPE filed for bankruptcy in 1992. This was a difficult period for EPE, but thanks to the hard work of dedicated employees who continued to provide quality service to customers, EPE was able to weather the storm and emerge from bankruptcy in 1996 with a fresh start.
Change in the electric utility industry is redefining EPE in ways that are not yet fully known, but change has been part of EPE for over 100 years.
EPE has grown from 450 customers in 1901 to 309,000 customers in 2001. Generating capacity has increased just as dramatically in that same time period, from 500 kW to 1.5 million kW. EPE continues to transform itself to meet the needs of its customers.
EPE has entered the 21st century as a flexible, forward-thinking energy company dedicated to its customers, shareholders, and employees.
The little company that Zach White started in 1901 has grown and changed, and has made great strides in providing its customers with safe, reliable energy. Along the way, it has also worked to maintain the highest standards of quality service.
EPE and its employees are committed to meeting the future with the same enthusiasm, dedication, leadership, and vision that marked the companys first one hundred years.
El Paso Electric celebrating a century of progress...and a future of energy.