Street lighting was minimal by today's standards in foundation and early Melbourne and, where lighting was provided, it consisted of oil lamps hoisted on saplings. The residents of Melbourne relied on candles and oil lamps, in their various forms, for illumination. In the 1840s one or two entrepreneurial shopkeepers installed small coal gas plants to illuminate their shops. Notable among them was William Overton, baker and confectioner of Swanston Street, who utilised apparatus provided by Fitzroy blacksmith, George South. First used at Overton's shop on 23 July 1849, gas proved to be a great success and attracted much custom.
The improvement in illumination was considerable and resulted in the formation in 1850 of the City of Melbourne Gas and Coke Co. Because of construction delays caused by the exodus of men to the gold diggings, it was New Year's Day 1856 before coal gas was supplied to the shops and offices of Melbourne from the company's works at Batmans Hill (West Melbourne). Compared with oil lamps, gas lighting was a major advance. However, the new illuminant was not available for street lighting until August 1857, following protracted price negotiations between the Melbourne City Council and the Gas Co.
The demand for gas was great and the company laid new mains to supply many of what are now Melbourne's inner suburbs. Seeing the demand, and the opportunity, new gas companies were formed to compete with the existing company to service other areas. The Collingwood, Fitzroy and District Gas and Coke Co., established in 1859, commenced supply from its works in North Fitzroy in May 1861. The South Melbourne Gas Co. followed in March 1873.
In the four years of bitter competition that followed, gas prices were cut to the bone, gas consumers enjoyed the benefits and the three companies lost money. In 1877 they agreed to amalgamate to form the Metropolitan Gas Co., commencing operations on 1 January 1878. While gas lighting remained the mainstay of the market, gas cookers, gas water heaters and gas fires grew in popularity through the 1870s, particularly during the land boom decade of the 1880s. By 1900 there were 50 gasworks in Victoria and 16 in the greater Melbourne area: West Melbourne, North Fitzroy, Williamstown, South Melbourne, Brighton, Footscray, Lilydale, Newport, Dandenong, Mentone, Heidelberg, Mornington, Frankston, Oakleigh, Box Hill and Brunswick.
In the late 1870s the threat of electric lighting had its first impact on gas companies around the world. In 1881 the Victorian Electric Light Co. displayed an electric lamp (with the generator powered by a gas engine) outside its Swanston Street premises and the first Melbourne Electrical Exhibition took place in the following year. These were early warnings for the gas industry, but it was 1888 before the threat was first realised when the Melbourne City Council replaced two gas lamps at a city intersection with electricity. The innovation of the Welsbach Incandescent Gas Mantle, which provided a markedly improved light, helped the gas companies hold back the lighting market for a few additional years, but the change to electric street lighting was inevitable.
Small electricity generating plants were installed to illuminate individual premises. The Victorian Electric Light Co. was succeeded by the Australian Electric Co. and later by the Melbourne Electric Supply Co. among numerous others. Locally, the first example of the general supply of electricity from a central point was the establishment by the Melbourne City Council of the Spencer Street Power Station from which the streets of the central business district were first illuminated on 7 March 1894. Ironically, the power was generated using boilers fired by coke supplied from the gasworks of the Metropolitan Gas Co.
In 1896 the Victorian Parliament enacted the Electric Light and Power Act to bring some sense of order and regulation to what until then had been a new and totally unregulated industry dealing in a potentially hazardous field. The Victorian government authorised the electrification of Melbourne's suburban railway network in 1912 and work began on construction of the Newport railway power station in 1913. Construction was delayed by World War I and it was 1919 before the first electric train ran from Flinders Street to Essendon. Electric trams commenced operation in Melbourne in 1906, although a small service had operated between Box Hill and Doncaster from 1889 to 1896, mainly at weekends and during holiday periods.
Both the well-established gas industry and the newly established electricity industry relied on black coal supplied from New South Wales. This supply was unreliable, often disrupted by strikes on the coalfields or the waterfront. A New South Wales mining strike in 1916 finally brought sufficient pressure to bear on the Victorian government to investigate the use of brown coal from the Latrobe Valley. The Brown Coal Advisory Committee, appointed in 1917, recommended formation of a body of Electricity Commissioners and construction of a power station at Morwell (in an area later known as Yallourn) to produce electricity from brown coal. The bill to create such a body was passed in December 1918 and the commissioners appointed in March 1919. In 1920 Sir John Monash was appointed general manager and in January 1921, when the State Electricity Commission of Victoria (SECV) succeeded the Electricity Commissioners, Monash was the first chairman.
The four main organisations generating electricity in Melbourne - the Melbourne City Council, the Melbourne Electric Supply Co., the North Melbourne Electric Tramways and Lighting Co. and the Newport power station of the Railway Commissioners - had neither a standard voltage, phase or current, and tariffs varied as much as the Melbourne weather. In the ensuing years, the SECV introduced uniform standards, acquired the two main independent companies, and eventually incorporated Spencer Street and Newport power stations into the State system. However, as a consequence of the earlier private ownership, electricity distribution remained at least partly in the domain of local government with eleven Municipal Electrical Undertakings distributing and selling electricity purchased from the SECV.
While the State-owned SECV was established in 1921 to achieve independence from the New South Wales coal industry, the Victorian gas industry remained subject to frequent coal shortages resulting in gas rationing for Melbourne and many country centres. The situation was particularly severe in the 1940s with the result that, in 1950, the three main political parties agreed to involve the State in gas production with the formation of the Gas and Fuel Corporation of Victoria (GFCV), incorporating the Metropolitan Gas Co., the Brighton Gas Co. and the State Government.
Legislation was passed in December 1950 and GFCV commenced commercial operations on 1 July 1951. Its primary goal was construction of a brown coal gasification plant at Morwell using the Lurgi process. An associated project was the design and construction of Australia's first long-distance high-pressure gas pipeline from Morwell to Melbourne. Plant and pipeline began operations in 1956 and brown coal gas eventually supplied 30% of Melbourne's gas requirements. The commissioning of Morwell triggered the closure of the South Melbourne gasworks. While GFCV supplied much of greater Melbourne, other privately owned gas companies remained. By far the most significant was the Colonial Gas Association (CGA) which operated large gasworks at Box Hill and Footscray and supplied about 40% of the metropolitan area.
In 1965 commercial reserves of natural gas were discovered by Esso/BHP beneath Bass Strait near Lakes Entrance. Natural gas, distributed by both GFCV and CGA, arrived in March 1969. A program to convert almost 1.3 million gas appliances in over 500 000 homes began in Carrum in April and was completed in Altona 20 months later. As the conversion program proceeded, the gasworks around Melbourne were closed down: Highett in August 1969, Box Hill three months later, and in March 1970 the Footscray gasworks closed. The largest and oldest, West Melbourne, ceased operations in December of that year, bringing to an end 113 years of gas production at the site. A very visible aspect of the introduction of natural gas was the decommissioning and demolition of the numerous gasometers (correctly known as gas holders) dotted around the suburban landscape. These large structures, which dominated local skylines, stored gas at times of low demand for supply into the surrounding network of gas mains at times of high demand.
The advent of natural gas brought markedly lower tariffs, heralding the beginning of a long period of sometimes bitter competition between the two government-owned energy utilities. The OPEC-inspired oil price rises of the 1970s saw much of Melbourne's domestic, commercial and industrial energy users switch from oil to natural gas. In 1973 GFCV acquired CGA and became the sole supplier of natural gas in Victoria.
From the 1950s to the early 1980s the SECV expanded dramatically and, following the arrival of natural gas in 1969, GFCV mushroomed in the 1970s and early 1980s. However, by the late 1980s and early 1990s, a wave of economic reform was impacting on Australia and all government business enterprises were coming under close scrutiny. The SECV was criticised for overstaffing and for expanding electricity-generating capacity when forecasts of economic growth could not justify such expansion. Under political pressure a major downsizing program was implemented. Employee numbers were cut from 22 000 to 12 000 between 1989 and 1993 when, in line with the corporatisation and privatisation policies of the Kennett Liberal Government, the SECV was divided into three separate operations: Generation Victoria; National Electricity; and Electricity Services Victoria, responsible respectively for generation, transmission and distribution. In January 1995 Generation Victoria was split into five separate, competing businesses which were then sold during 1996-97. National Electricity was divided into two new businesses in late 1994: Victorian Power Exchange and PowerNet Victoria, the latter being sold in November 1997.
The five distribution businesses created from Electricity Services Victoria, United Energy, Solaris Power, CitiPower, Powercor, and Eastern Energy, supply electricity to consumers in specific areas of Melbourne and regional Victoria. Each was sold by tender in 1995. At the time of the electricity industry restructure, the assets of the Municipal Electricity Undertakings were integrated with the SECV to form part of the new distribution businesses. The councils received payment for the assets from the proceeds of the sale of the new electricity distribution businesses.
The gas industry was similarly transformed. Gas and Fuel was drastically downsized (from approximately 6000 employees to 1500), the gas transmission operations were separated into a new organisation, Gas Transmission Corporation (later Transmission Pipelines Australia), and the six new companies, three gas distributors (Multinet Gas, Westar, and Stratus Networks) and three gas retailers (Ikon Energy, Kinetik Energy, and Energy 21), that were created were sold in 1998.
Essentially, the wheel had turned full circle: in Melbourne both the gas industry and the electricity industry began with private sector organisations, each at different times passed to government ownership, and then, in the 1990s, reverted to the private sector. By the late 1990s the Victorian government had withdrawn from the energy industry, apart from some residual assets and system management functions.