Who Manages Our Electricity in Ontario: A Brief History

Nov 06, 2015

Confused as to how our electricity system works and how it has evolved over time? Who are the key players and why and how have rates changed? Put your feet up, grab a coffee, and dig in to this timeline detailing how Ontario’s electricity sector has been managed, owned, and juggled since the mid-1900s:

1950s: Ontario has a public electricity utility, the Ontario Hydro Commission, made up of small local systems. Coal-fired power stations are built as population and industry grow, and electricity needs outpace existing hydro-electricity capacity.

1960: The Ontario Energy Board is founded as an impartial public agency responsible for regulating local distribution companies and for ensuring that the distribution companies fulfill their obligations to connect and serve customers. The OEB currently approves the rates that utilities can charge their customers, creates policy, and approves construction.

1970: All of Ontario's power systems are combined into one synchronized grid, with the exception of remote communities. Natural gas prices rise due to crisis in the Middle East and nuclear generation comes to the forefront.

1973: The Ministry of Energy is created with the mandate to manage the province’s electricity system.

1971: Expansion of electricity generation: The Pickering Nuclear Generating Station comes into service.

1974: The existing Ontario Hydro Commission is recreated as Ontario Hydro, a crown corporation governed by a board of directors. The corporation is not intended to generate profits or pay taxes, but to provide energy at cost.

1977 - 1989: The Bruce Nuclear Generating Station and later, the Darlington Nuclear Generating Station come into service. The building of these nuclear plants is costly and results in a debt of over $38.1 billion, causing electricity rates to increase. 

1989: Ontario Hydro initiates a 25-year demand-supply planning exercise.

1992: Ontario Hydro faces a downturn in the economy and falling demand, but the demand-supply plan is not implemented. Consumer rates rise by 40%.

1993: The Ontario government freezes energy prices and they remain so for nearly a decade.

1995 - 1996: The Macdonald Committee is created to advise on electricity competition and provide recommendations on the restructuring of Ontario's electricity industry.

October 1998: The Energy Competition Act authorizes the restructuring of Ontario Hydro and the eventual opening of wholesale and retail electricity markets in the province.

April 1, 1999: Due to the Energy Competition Act, Ontario Hydro is restructured into 5 separate companies: 

1) Ontario Power Generation (OPG) – A commercial company that generates electricity and competes with other smaller generating companies in the Ontario marketplace. Examples of other generating companies in the province include: Bruce Power, Algonquin Power, Hamilton Renewable Power Inc., Energy Ottawa, Sky Generation, and Brookfield Renewable Power.

2) Ontario Hydro Services Company (later to become Hydro One)  - A commercial company that owns and maintains transmission and distribution lines to move electricity across the province. Examples of other smaller distribution companies include Toronto Hydro Electric System, Veridian, and Northern Ontario Wires Inc. 

3) Independent Market Operator (later to become the Independent Electricity System Operator) - A crown corporation responsible for directing the flow of electricity across the network owned by Ontario Hydro Services Company (Hydro One) and other transmission companies. It also manages the competitive wholesale electricity market and administers an integrated North American electricity network. 

4) Electrical Safety Authority - A private non-profit corporation having administrative authority mandated by the Government of Ontario to enhance and promote public electrical safety, ensure compliance with regulations, promote awareness, and educate. 

5) Ontario Electricity Financial Corporation – A crown agency charged with managing the $38.1 billion in total debt and other liabilities inherited from the former Ontario Hydro. A portion of the $38.1 billion is supported by the value of the assets of Ontario Hydro successor companies, leaving $19.4 billion in stranded debt. This $19.4 billion is to be paid down by Ontario consumers through a Debt Retirement Charge on their monthly bills. 

May 1, 2000: Ontario Hydro Services Company is re-launched as Hydro One, a corporate holding company with five subsidiaries: Hydro One Networks Inc., Hydro One Remote Communities Inc., Hydro One Markets Inc., Hydro One Telecom Inc., Ontario Hydro Energy Inc. 

May 1, 2002: Ontario opens its electricity market so that private companies can compete, allowing customers to choose between continuing to buy electricity from their electricity distributor or from an independent electricity retailer licensed by the Ontario Energy Board

2003: The transmission grid is old, fragile, and composed of aging generation plants and coal stations causing air pollution. This poor infrastructure results in a blackout, which rolls through eastern Ontario in the summer. The government promises to strengthen the system.

2004: Electricity Restructuring Act is passed, aiming to reinvigorate the province’s electricity sector in order to encourage new electricity supply, promote energy conservation, and provide stable prices at a level reflecting the true cost of electricity. 

2004: Ontario Power Authority (OPA), an independent non-profit corporation, is established and charged with assessing the long-term adequacy of electricity resources, forecasting and managing demand, achieving targets set by government for conservation and renewable energy, and preparing an integrated electricity system plan. Included in its mandate is facilitating the removal of coal in the province’s energy supply mix. 

2005: The Independent Marketing Operator (IMO) is renamed the Independent Electricity System Operator (IESO), and is an independent, not-for-profit entity, directed by a board of directors appointed by the government of Ontario. It’s fees and licences are set by the Ontario Energy Board.

2005: Ontario stimulates private investment in new electricity generation by offering new generators long-term fixed-price contracts at above-market rates.

2006: Government of Ontario imposes a charge (or rebate) on all electricity consumers called the Global Adjustment Charge (also known as the Provincial Benefit) to cover the difference between the market rate for electricity and what is paid to private electricity generators based on the fixed contracts. Customers buying electricity under the Regulated Price Plan, pay an estimate of the Global Adjustment, which is already built into the rate for electricity set by the Ontario Energy Board. Customers buying from an electricity retailer see the Global Adjustment displayed as a separate line item on their bill, based on their consumption.

Global adjustment charge subsidies between 2006 and 2011 inclusive:

45% nuclear generation
34% natural gas generation
8% energy efficiency programs & hydro generation
6.7% coal power plants
6% renewable energy generation (primarily wind and solar)

Global adjustment charge subsidies in July 2014*:

63% nuclear & natural gas generation
29% renewable energy generation (hydro, solar, biomass & landfill, wind)
6.7% conservation efforts
0.06% Industrial Electricity Incentive Program

*Based on reports provided by IESO.

2006: Renewable Energy Standard Offer Program is established, offering a number of fixed 20-year feed-in tariffs for hydro, wind, solar (PV) and biomass projects. This program would later be expanded under the Green Energy Act of 2009 to include higher rates and various changes to the connection process to simplify the development process.

2007: Ontario introduces its Climate Change Action Plan, which includes greenhouse gas emissions reduction targets. It is reported in 2014 that Ontario’s greenhouse gas emissions have been reduced by 5.9% since 1990

2009: The Green Energy Act is passed, aiming to attract new investment, create green jobs, and provide clean renewable power to Ontario. The renewable energy Feed-in Tariff (FIT) Program is part of this legislation.

2010: The five-year Ontario Clean Energy Benefit is created, providing customers a 10% discount off the total cost of electricity charges on their bill. It is intended to help with the increased costs of updating infrastructure and implementing clean power sources. 

2011: The Government updates its Supply Mix Directive to the Ontario Power Authority to include conservation targets, refurbishment of nuclear plants, continued phase-out of coal-powered generation, increased capacity of renewables, etc. 

2012: Electricity rates for consumers continue to rise due to system upgrades, generation plant refurbishments, investments in transmission and distribution costs, conservation and renewable energy efforts, and the replacement of coal-fired power.

2012Industrial Electricity Incentive Program is created to use up surplus energy produced in Ontario by encouraging businesses to ramp up their industrial production in exchange for discounted electricity rates. 

2013: Ontario’s Long-Term Energy Plan is released, detailing five principles: cost effectiveness, reliability, clean energy, community engagement, and emphasis on conservation and demand management. 

2013: Import and export of surplus Ontario electricity is a hot issue, with the province exporting a large amount of its energy to neighbouring provinces and states at rates that do not include the Global Adjustment charged to Ontarians.

2014: Over 1,900 MW of new wind, solar, biofuel and hydro power is being fed into the province’s transmission and distribution systems.   

January 1, 2015: The Ontario Power Authority (OPA) merges with the Independent Electricity System Operator (IESO) to create a new organization combining both mandates, under the IESO name. 

Spring 2015: The Debt Retirement Charge (DRC) is still being paid by customers at a rate of 0.7 cents per kilowatt-hour of electricity consumed (about $70 per year for most consumers). The government announces plans to remove the DRC cost from residential electricity bills after December 31, 2015. The stranded debt is still over $2.5 billion.

Fall 2015: Electricity prices are raised by the Ontario Energy Board. Reasons cited for the rate hike: increased costs from Ontario Power Generation (OPG) nuclear and hydro-electric power plants, expenses related to renewable energy generation systems, and cost-recoveries sought by the OPG.

You'll probably need to read this timeline a few times to get a better understanding of the complex saga of electricity in Ontario. There is a wealth of information in each of the links above, and you’re encouraged to dig deep and find out more. Stay tuned for another post detailing community power models and how citizens benefit.