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- Ontario Electricity Market
History of Ontario Hydro
Prior to 1885, the electricity market in Ontario was completely unregulated, in large part because electricity had not yet been invented at the time of Confederation in 1867, thus leaving the question of federal or provincial jurisdiction undetermined.
In 1885, after several disputes, a British decision affirmed the Province's rights over a majority of the Canadian hydro flow at Niagara Falls. This decision effectively confirmed the Province's jurisdiction over the entire electricity market.
Sir Adam Beck Hydro-Electric
on Niagara River
By 1903, the economic potential of Niagara Falls was well understood. A massive hydroelectric project had been underway on the American side of the Falls since 1895 and created an economic boom in Buffalo and Niagara Falls, NY. Three syndicates had been awarded franchises to generate power for Ontario from the Canadian side of the Falls. At the same time, 16 Ontario municipalities, including Toronto, were meeting to discuss the feasibility of generating power at the Falls and transmitting it to their communities.
In 1905, Provincial government officials, including Adam Beck, determined that the Niagara Falls project required organization at a higher level, and formed the Ontario Power Commission, renamed the Ontario Hydro Commission in 1906, and eventually known as Ontario Hydro.
The Commission, the first publicly owned electric utility in the world, took responsibility for the generation of power at Niagara Falls and elsewhere and for its transmission to the 16 municipalities and ultimately throughout the province.
Ontario Hydro dominated the province's electricity industry throughout the century. Its major accomplishments and initiatives included:
In 1972, the Power Corporation Act converted Ontario Hydro into a Crown corporation. This formalized Ontario Hydro's role as a profit driven entity rather than a mechanism solely used for the public good.
By 1990, Ontario Hydro's duties under the Power Corporation Act included:
Bruce Power Nuclear Facility near Kincardine (opened 1968)
Unfortunately, these goals conflicted with each other and the corporation's profit maximization mandate. Ontario Hydro was simultaneously responsible for delivering good economic results and undermining them with its own energy efficiency programs and support of competitors.
In addition, the nuclear program, while successfully generating over 30% of the province's electricity needs, had created an enormous debt for Ontario Hydro - well beyond what could be supported by electricity revenues. None of the nuclear plants was viable on an economic basis.
In a last ditch effort to save itself, Ontario Hydro raised electricity rates by 40% from 1990 to 1994, but still lost $3.6 billion in 1993. As a monopoly, the corporation lacked the competitive pressures necessary to reform itself.
The election of reform-minded Premier Mike Harris in 1995 provided the impetus for change in the Ontario electricity industry with the Energy Competition Act of 1998.