Insull and Enron: Is There a Parallel? Insull's Glory Days (Part 2 of a 3-Part Series)

Infrastructure 42:4 (2003)

3 Pages Posted: 31 Oct 2012

See all articles by Hon. Richard D. Cudahy

Hon. Richard D. Cudahy

U.S. Court of Appeals for the 7th Circuit

Date Written: 2003

Abstract

This article is part two of a three-part series on Samuel Insull, infamously known for presiding over a pyramid of electric utility holding companies which at its collapse left hundreds of thousands of investors in varying degrees of destitution. As chief executive for Chicago Edison, Insull sought to further the development of central station power and expand his business by absorbing his nearby competitors into his own company. This "bigger is better" philosophy led to a growth of his company's electricity output in 1907 to sixty times what it had been when Insull arrived in Chicago fifteen years prior. Insull's business strategies included efficiently diversifying customers' energy demands, using sophisticated rate-making processes and creating a pattern of monopoly franchises. By using economies of scale to lower prices which in turn further increased demand, Insull pioneered a recipe for success which was followed by the industry until about 1970. Interestingly, Insull advocated for state regulation of public utilities, promoting the idea of the state setting rates and standards of service which utilities must adhere to under threat of government takeover. By 1917, Insull was running assets exceeding $400 million in gas, traction and electric power and was operating in 13 states.

Suggested Citation

Cudahy, Richard D., Insull and Enron: Is There a Parallel? Insull's Glory Days (Part 2 of a 3-Part Series) (2003). Infrastructure 42:4 (2003), Available at SSRN: https://ssrn.com/abstract=2018585

Richard D. Cudahy (Contact Author)

U.S. Court of Appeals for the 7th Circuit ( email )

219 S. Dearborn Street
Chicago, IL 60604
United States

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