Newspaper article The Canadian Press

How Does the Hydro System Work in Ontario? the Canadian Press Explains

Newspaper article The Canadian Press

How Does the Hydro System Work in Ontario? the Canadian Press Explains

Article excerpt

How does the hydro system work in Ontario?


TORONTO - The price of electricity in Ontario has long been a sore point for many in the province, with the governing Liberals being taken to task for rising hydo rates for years. But how does the system work? And would proposals put forward by the Progressive Conservatives and the New Democrats ahead of next month's election improve the situation? The Canadian Press tried to tackle those questions.

How did we get to the current state of affairs?

Hydro has figured largely in political discourse for decades.

"In Ontario, electricity is to premiers as the Middle East is to American Presidents," said Keith Stewart, senior energy strategist for Green Peace Canada. "It's always somewhere on their desks ... and it's never easy."

Much of the province's history with electricity is bound up in a now-defunct entity that came to be known as Ontario Hydro. Stewart said it was responsible for all three components of the province's electricity system -- owning and operating the power producers, transmitting the power, and regulating rates.

Ontario Hydro became the source of political friction starting in roughly the 1970s, culminating in the decision to privatize the corporation in 1999. The government of the time, led by Progressive Conservative Premier Mike Harris, broke Ontario Hydro up into the hodgepodge of entities that make up Ontario's current system.

Several agencies currently handle tasks previously managed by Ontario Hydro.

Ontario Power Generation (OPG) is the owner and operator of many of Ontario's power generators, such as nuclear and hydroelectric plants.

Transmission is now primarily handled by Hydro One, which funnels power to a number of local utilities who in turn ensure it reaches customers.

The Independent Electricity System Operator (IESO) co-ordinates Ontario's electricity needs, balancing the supply of power with demand and directing the flow of electricity from various generation sources across the province's grid of transmission lines. It also handles long-term planning for the province and is responsible for sourcing long-term contracts with electricity generators, including wind and solar power companies. These contracts can be up to 20 years in length.

The Ontario Energy Board (OEB) regulates the electricity and natural gas sectors, approves and sets delivery rates for power distribution and transmission as well as prices for consumers.

Why have rates gone up?

Hydro rates have more than doubled in the past decade, taking a major toll on Premier Kathleen Wynne's approval ratings. Analysts say there are several factors behind the increase and argue many of them have benefits that are more evident in the long-term.

Stewart said the previous Tory government capped hydro rates at what he called an unrealistically low number of 3.5 cents per kilowatt hour back in 2000. The Liberals left that rate in place until 2004.

Stewart attributed much of the rate spike to upgrades the province made to its aging infrastructure. This involved refurbishing nuclear plants and building new generating facilities to replace the coal-fired power plants the province phased out as of 2014.

But analysts agree the long-term contracts signed with power producers have also played a key role. Michael Trebilcock, a law professor with the University of Toronto, authored a paper for the C.D. Howe Institute criticizing the rates the province negotiated starting in 2009 when the Green Energy Act took effect. …

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