El Paso Electric provides electric and nuclear power for much of the Southwest. It grew from the Brush Electric Light Company of El Paso, which was organized in the late 1880s by Mayor Joseph Magoffin and the El Paso City Council at the urging of a group of local citizens. By 1890 El Paso pioneer Zach T. White had taken over the electrical business and installed generating equipment to enable the use of incandescent lamps in the city. The current enterprise was founded when El Paso Electric Railway Company took over the Brush Electric plant on August 30, 1901, and originally incorporated as the El Paso Electric Railway Company to provide power solely within the El Paso area. Among early officers of the firm was El Paso businessman and journalist Felix Martinez, who served as vice president.
In 1902 El Paso Electric Railway negotiated a management contract with Stone and Webster Management Consultants, a New England company that supplied contractual engineering and financial assistance to utilities nationwide, and accomplished its first objective of replacing mule-drawn streetcars with electric ones. Further expansion came in 1905, when the company purchased the International Light and Power Company, commissioned by the state in 1889 to supply power to El Paso and surrounding communities, and in 1914 acquired the electrical divisions of the El Paso Gas and Electric Company. By 1923 the new electric company had a generating capacity of 18,000 watts. Its name was changed to El Paso Electric Company in 1925, and later that year the organization was permitted to conduct business in New Mexico. By 1928 the communities of Hatch and Rincon in Texas had been added to the system.
As the company expanded, its ability to supply power to the citizens of El Paso and neighboring communities increased. The company's Rio Grande Power Station, built in the upper valley of El Paso in 1929, enabled the company to erect high-voltage lines to serve Sierra Blanca and Van Horn. A decade later El Paso Electric acquired the Mesilla Valley Electric Company, formed in 1924 in New Mexico to serve Las Cruces and its neighboring communities. Output capabilities increased with a 20,000-kilowatt unit at the same location in 1950 and a 50,000-kilowatt turbogenerator there in 1956. In 1950 customers of El Paso Electric grew from 4,844 to 54,108 in a single year, and by the end of 1956 a total of 75,747 customers belonged to the system. Meanwhile, El Paso Electric became an independent electric utility when it ended its relationship with Stone and Webster Management Consultants in 1947. A 90,000-kilowatt unit was under construction, and another was completed at Newman Power Station in Texas by 1960. In 1966 the station had a 115,000-kilowatt unit. The Santa Fe Power Station, built in 1901, was almost completely torn down in 1961, and the company purchased 7 percent interest in two of five units at Four Corners Generating Station in Farmington, New Mexico, completed in 1969. A more efficient unit, powered primarily by the Solar Photovoltaic Project, a joint venture of the company and New Mexico State University, was completed in 1975 at the Newman Power Station. In 1979, after sixty years headquartered in the Martin Building, the company ended the decade by moving to the Mills Building, originally constructed in 1912 and once one of the largest concrete buildings in the United States. By this time, the company was locally known for lighting a huge star on an El Paso mountain at Christmas.
In 1980 El Paso Electric completed its Copper Station, a turbine system built at El Paso to withstand the West Texas summer heat. The total cost of fuel used by the company grew from $882,257 in 1950 to $122.8 million in 1985. Faced by the energy crisis of the 1970s, El Paso Electric attempted to sign long-term fuel contracts, increase its research and development efforts, acquire new fuel-storage facilities, reconsider fuel-mix techniques, and increase its rates for the first time. In 1984 the company briefly opened downtown offices for customer convenience, which it subsequently closed in cost-cutting measures after the Public Utility Commission of Texas mandated rate reductions in 1984 and 1985. The reduced rates were discontinued in 1986. In 1983 the New Mexico Public Service Commission granted El Paso Electric a $5.9 million increase in base rates; in 1986 the commission granted a $7 million increase.
El Paso Electric has long been a leader in nuclear power, beginning with the formation of the Arizona Nuclear Power Project in 1972. Three units became operational at Palo Verde Nuclear Generating Station, near Phoenix, in 1988, making the plant the largest in the Western Hemisphere. The first unit was declared in "commercial operation" in 1985, thus allowing management to include its cost in the rate base for power. The second unit achieved a self-sustained nuclear chain reaction, was granted a full-power operating license, and declared in commercial operation in 1986. El Paso Electric subsequently sold part ownership of this unit to a group of investors and in the 1990s leased the unit back from the investor group, retaining partial responsibility for operation and maintenance costs in exchange for a 27½-year commitment and a renewal provision. The third unit obtained its commercial license in 1988, giving the plant an overall capacity of 3,810 megawatts. Another sale and lease-back transaction, also arranged in 1988, provided for the sale of 40 percent of this unit and its lease back to the company for a price of $250 million. The company used proceeds from the sale to retire debt and achieve other corporate objectives. By the 1990s El Paso Electric served more than 550,000 customers in a 10,000-square-mile area from New Caballo Dam, New Mexico, to Van Horn, Texas, a community 120 miles southeast of El Paso.
In the late 1980s, however, El Paso Electric was losing money, largely because of its investment in the Palo Verde Nuclear Generating Station, regulatory decisions that limited its ability to charge rates high enough to cover its costs, and failed attempts to diversify into such areas as real estate and furniture manufacture. In 1992, at which time it served 258,000 customers in El Paso, Las Cruces, New Mexico, and small farming communities along the Rio Grande, the company was forced to declare bankruptcy. Central and South West Corporation, a Dallas-based utility holding company, agreed to buy the firm in 1993 under a reorganization plan that would make it a wholly-owned subsidiary; the plan authorized the company to acquire 255,000 customers in the Rio Grande valley and southern New Mexico, to buy additional power, and to control all major electric interconnections along the border between the United States and Mexico, except one in San Diego. Central and South West, however, faced a takeover battle for the firm with the smaller Southwestern Public Service Company of Amarillo, which would likely increase rates to customers. Passage of the North American Free Trade Agreement, however, promised future success for the company, which was located on the border just across from Ciudad Juárez, Chihuahua, had long sold power to Mexico, and was in a strong position to expand.