#1450 1892 · Chicago Edison / Commonwealth Edison (Samuel Insull) · electric utilities
Fill the Off-Peak Hours and Electricity Gets Cheap
the problem
Electricity can't be stored: a plant sized for the evening peak sat half-idle all day, making power a high-cost luxury.
background
Samuel Insull, born in London in 1859, was Thomas Edison's business manager in New York before taking over the Chicago Edison Company in 1892. He arrived at one of about twenty power stations serving just 5,000 customers in a city of a million, where electricity was a high-cost luxury. Risking a personal loan of $250,000, he bought out his competition and built the world's largest power plant, the Harrison Street Station.
Because electricity is manufactured, transported and consumed in the same instant, an idle plant is pure loss. Insull saw that he could charge different prices to customers using power at different times: by recruiting users outside the popular evening hours he could spread fixed costs across more sales, then push prices down further by wiring homes cheaply, giving away appliances and cutting rates.
what everyone would do
Charge all users a uniform rate high enough to cover the peak plant's cost.
what they saw
The plant was already built; an unsold hour was a total loss. Discounting idle hours raised, not cut, total revenue, and each new off-peak load justified a bigger plant with lower unit costs for everyone.
the move
Sell the same kilowatt-hour at different prices by clock: cheap power for daytime industrial loads, higher prices for the residential evening peak. Every off-peak customer raises the load factor, the fraction of capacity actually earning money, so the giant plant's fixed costs amortize across more sales. That lets rates fall, which recruits more customers, a pricing flywheel that turned electricity from a luxury into a household utility.
why it works
Fixed costs dominate electricity, so spreading them over more sold hours cuts unit cost; complementary load shapes fill each other's valleys; cheaper rates then grow the customer base in a loop.
the payoff
By the late 1920s Insull's utilities served more than four million customers in 32 states, valued at nearly $3 billion (PBS).
where it breaks
It fails where loads cannot be shifted or segmented, when everyone peaks at once; and it ended badly for Insull himself, whose leveraged utility empire collapsed in the Depression, followed by a 1934 fraud trial and acquittal.
what came after
Time-of-use and off-peak pricing became foundations of utility rate design worldwide, and the template for every capacity business that prices by clock.
references
- [1]Who Made America? Innovators: Samuel InsullPBS, 2026pbs.org
- [2]Samuel Insull (biography)Engineering and Technology History Wiki (IEEE), 2016ethw.org