Ontario’s Energy Market
Create It !
Deliver It !
Measure It !
In a nutshell, that describes the nature of the electricity business.
1. Create It - Generation is the term given to the creation of electricity. The
spinning of a generator produces electricity. Generators are made to spin using a variety of different means.
Hydroelectric dams use water to turn turbines that causes generators to spin and produce electricity. Nuclear
fission produces steam to drive turbines and steam turbines can also be fueled by coal, oil or natural gas.
Turbines can also be direct fired by natural gas. Individual windmills and wind farms are being built to generate
electricity from renewable resources. Most of the power in Ontario is generated by Ontario Power Generation
Corp. (OPG).
2. Deliver It - Generation facilities are generally not located exactly where electricity
is needed therefore it must be delivered from the generator to the consumer. In order to move electricity over
large distances voltages are raised and electricity moves on transmission lines to sub-stations that connect
to local distribution systems. Transmission lines are generally hung from high metal towers. In Ontario, the
transmission system is predominantly owned by Hydro One Networks Inc. Closer to the consumer – voltage
is reduced at sub-stations and electricity is distributed to homes and businesses through wires that hang on
poles on local streets or run underground and connect to your home or business at the electric meter which measures
your usage.
3. Measure it – At the point of connection to the consumer the amount of
electricity used is measured using an electricity meter. While traditionally, residential consumers simply had
a consumption meter, in 2004 the Ontario Government announced its intention to “smart meter” all
consumers in the province by 2010. “Smart Meters” track how much electricity consumers use and when
they use it. Since 2002 there have been a number of significant changes in the electricity market that have impacted
consumers. Beginning in 2002, consumer’s bills were unbundled and showed the cost of electricity separately
from the cost of delivering and measuring it.
Electricity can not be stored. Therefore, at any instant, the demand for electricity i.e. the use, must balance
the supply, the quantity generated. As demand increases the sources of supply become scarcer, more expensive
to produce and the price goes up. In the past the price charged to consumers for electricity was lower than its
cost resulting in incorrect price signals in the market. Stress on aging generation, transmission and distribution
systems in Ontario have caused the government to reconsider the importance of conservation to Ontarians. As an
important step in the development of a conservation culture the government recognized that there was a need to
match the cost and price of electricity and has introduced a number of changes to achieve this.
Firstly, stepped pricing for electricity was introduced in April 2004 to reflect higher costs for higher levels
of consumption. The government announced its intention to implement a smart meter plan which allows a closer
matching of costs and price and the Ontario Energy Board announced time-of-use pricing that will apply to Smart
Metered customers. This time-of-use pricing is expected to be in place November 1, 2007. In the meantime, the
tiered electricity prices, which the Ontario Energy Board resets every May and November to better reflect the
actual cost of electricity, will continue to be used for smart metered customers. If you want to see how the
price fluctuates select this
link.