Selling Power: Economics, Policy, and Electric Utilities before 1940 by John L. Neufeld (review)

Timothy Mitchell has written that economics makes its own world, using society as a laboratory in ways that normalize risky experiments. This is perhaps nowhere more evident than in the energy industries, and John L. Neufeld’s recent history, Selling Power: Economics, Policy, and Electric Utilities before 1940, eloquently demonstrates how this has played out in the arena of electricity. Rather than a history of plucky inventors uncovering the mysteries of electricity while enterprising businessmen waited in the wings to market their discoveries, Neufeld presents the story of how interest in commercial application drove technological and institutional development in the electricity industry from the beginning. Subsequent debates about the rights of private industry and responsibilities to the public led to ongoing experimentation with electricity economics throughout the twentieth century—indeed, Neufeld argues, we are still trying to get it right.

Selling Power is an important reference for anyone studying electricity history. As Neufeld explores the institution building and politicking through which networked electricity created markets, sparked policy reform, and remade the built environment, he also provides an introduction to the history of corporate finance, the stock market, regulation, and theories of public utilities across the twentieth century. In doing so, the book delivers a powerful lesson on how institutions and politics shape and are shaped by large-scale technological systems. Fittingly, the main weaknesses of this otherwise sophisticated history stem from Neufeld’s assumptions about economics.

Neufeld’s book begins, as many electricity histories do, with Thomas Edison. In Neufeld’s eyes, however, Edison’s genius lay not in his role as inventor, but in his abilities as an “organizer and promoter” (18). Edison’s key contribution, Neufeld argues, was to model electricity on the gas-lighting business, a commercially successful utility model that gave customers flexibility, allowed companies to bill for individual usage, and thrived as a centralized networked system.

Of course, centralized for-profit power brought both benefits and dangers. Neufeld explains the subsequent history of American electricity as one of competing economic hypotheses, in which each era was an attempt to solve the externalities of the previous one. Fundamentally, his narrative revolves around three models of distribution—private investor–owned utilities, nonprofit public systems, and independent generators—which weave in and out of tension with one another throughout the twentieth century. Municipal franchise agreements, state regulation, and federal power policies further complicate the playing field.

The book adds particular insight into the holding company system that came to dominate the electricity industry before the 1930s. Holding companies were, essentially, economic institutions that helped electric utilities and their suppliers finance capital-intensive investments. They did so by consolidating operating utility stock in a parent company, which lent smaller utilities legitimacy through association, as well as providing technical and administrative support (usually for a fee). As Neufeld shows through a series of case studies, this system remained functional and lucrative as long as the electricity industry was in a state of continuous growth, but the repackaging of securities and the subsequent competition this culture of consolidation spurred led to a fragile financial bubble. As investor interest in the electricity industry grew, parent companies scrambled to incorporate more and more subsidiaries, leading to holding companies acquiring holding companies and everything being overvalued and recapitalized. By 1929, the majority of electricity generated and sold in the United States created largely fictitious profits for seven super-holding companies in a “crazy quilt” geography of disconnected operating utilities (115).

Like Edison light bulbs, holding companies are a stock character in American electricity history, but they rarely get the attention Neufeld pays them as nuanced organizations. While he acknowledges that this highly leveraged system encouraged risky financial decisions that hurt the American public after the market crash of 1929, he also explains what holding companies could do that independent generating utilities could not.

Namely, holding companies coordinated network integration across large geographic regions...