ANSWERING CUSTOMERS’ QUESTIONS ABOUT
Electricity in Ontario
DECEMBER 12, 2011
Visit us at www.ampco.org
Call (416) 260-0280
AMPCO booklet 6.indd 3
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Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2 How Ontario Uses Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3 Who Does What . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Ministry of Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ontario Energy Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Independent Electricity System Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ontario Power Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ontario Electricity Financial Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electrical Safety Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
10
11
11
11
12
4 Electricity Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ontario’s Generation Supply Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hydro-Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nuclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Coal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Solar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hourly Ontario Energy Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Congestion Management Settlement Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prescribed Base Load Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Bruce Nuclear facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clean Energy Standard Offer Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Renewable Energy Standard Offer Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Feed-in Tariff Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conservation Programs and Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
14
14
15
16
16
16
16
17
17
18
18
18
19
19
19
19
20
5 Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transmission Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Local Distribution Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Smart Meters and the Smart Grid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Answering Customers’ Questions about Electricity in Ontario
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1
Introduction
Electricityismorethanimportant;itisessential.
Ontariohasarelativelymodern,well-builtand
well-operated electricity system .
Itisanexpensivesystemrelativetoother
Canadianprovincesandmostplacesinthe
United States .
Whiletherehavebeendifferentpolicies
adoptedbydifferentgovernmentsoverthe
past20years,Ontario’sbasicelectricity
infrastructurehasbeenrelativelyunchanged
duringthisperiod.Therehavebeensignificant
recentinvestments,buttheassetsthatareused
mostwerebuiltagenerationago.
why is ontario’s electricity
system more expensive?
•
•
•
•
•
Mostoftheelectricitysystemanditsoperations
are transparent to customers . Customers
interactatthemostbasiclevel.Theyturnon
switches,opentherefrigeratorandboilakettle
ofwater.Customersdonotandshouldnothave
tothinkabouthowelectricityisgenerated,but
customers should care about how and when
they use electricity .
Whenitcomestopolicy,majorreformstook
placein1998,whenOntarioHydrowasbroken
up,inNovember2002whenthegovernment
reverseditselfandfixedprices,in2003when
theOntarioPowerAuthoritywascreated,
andagainin2009,whentheGovernmentof
Ontariocommittedtoits`greenjobsfromgreen
energy’ strategy .
Inkeepingwiththelastpolicyreform,Ontariois
ontracktoshutdownitscoalplantsbytheend
of 2014 . Coal power largely has been replaced
withinvestmentsinnatural-gasgenerating
capacity,andincentivesfornewinvestments
inrenewablegeneration,includingthepopular
Feed-inTariffprogramforsmall-scalesolarand
wind projects .
Electricitytoucheseveryoneintheprovince,
when storms cause trees to short-out
distributioncircuits,orwhenaplantisproposed
tobebuiltintheirneighbourhood,orwhena
customer gets that big monthly bill at the end
ofthesummer.YetmostOntarianstakereliable,
affordableandenvironmentallyresponsible
electricitysupplyasabasicentitlement.If
Ontarians want light; they turn on the switch .
[2]
AMPCO booklet 6.indd 2
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section 1: Introduction
Your
Electricity Bill
per
MWh
per
Day
per
Month
per
Year
Electricity
Explanation
Electricity
Electricityratesforresidenti
alcustomersareset
by the Ontario Energy Board . They are based on a
seasonaloutlookforaverageHourlyOntarioEnergy
PriceplusanestimateoftheGlobalAdjustment.
Hourly Ontario
Energy Price
$32 .32
$1 .09
$33 .03
$405 .09
The Hourly Ontario Energy Price is the price of
powersetinthewholesalemarketoperatedby
the Independent Electricity System Operator .
Global Adjustment
$38 .87
$1 .31
$39 .73
$487 .19
Sub-total
$71 .19
$2 .40
$72 .76
$892 .28
The Global Adjustmentrecoversthefixedregulated
rates and contract payments for generators and the
costs of demand-side management programs .
Delivery
Ratesfortransmissionanddistributionservicesare
set by the Ontario Energy Board .
Transmission
$10 .18
$0 .34
$10 .40
$127 .59
Transmissionprovidesbulkenergydeliveryat
highvoltageacrosstheprovincefromgenerators
toLocalDistributionCompaniesandend-use
customers .
Distribution
$14 .46
$0 .49
$14 .78
$181 .24
Sub-total
$24 .64
$0 .83
$25 .18
$308 .83
DistributionservicesareprovidedbyLocal
DistributionCompanies,mostownedand
operatedbymunicipalities.
Regulatory
$5 .91
$0 .20
$6 .04
$74 .07
Regulatory
RegulatorychargesincludeWholesaleMarket
ServicesChargesandoperatingcostsfortheOntario
Power Authority and the Independent Electricity
System Operator .
Debt
Retirement Charge
$7 .00
$0 .24
$7 .15
$87 .74
The Debt Retirement Charge pays down the debt
of the old Ontario Hydro held by the Ontario
ElectricityFinancialCorporation.
$108 .74
$3 .65
$111 .13
$1,362.93
$14 .14
$0 .47
$14 .45
$177 .18
Ontario Clean Energy
Benefit
-$12 .29
-$0 .41
-$12 .56
-$154 .01
Total Due
$110 .59
$3 .72
$113 .02
$1,386.10
Your Total
Electricity Charges
HST
Your Electricity Usage
(Typical Household)
The ontario Clean Energy Benefit is a 10%
rebateonelectricitybillspaidbytheGovernment
of Ontario .
Based on a typical suburban Ontario family home in a
2000 square foot house constructed in the 1960’s .
Daily
0 .034
MWh
33 .6
kWh
Monthly
1 .022
MWh
1022
kWh
12 .264
MWh
12264
kWh
Annual
Harmonized Federal Provincial Sales Tax (13%)
Note:Valuesarefor2011exceptdistribution,forwhich2010averagedistributionrevenuesperMWhareshown.
Answering Customers’ Questions About eleCtriCity in ontArio
AMPCO booklet 6.indd 3
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Becauseitisexpensive,becausemostofthe
assetsareownedbytheCrown,andbecause
ittoucheseveryone,electricityisapolitical
issueinOntario.Ithasbeenapoliticalissuefor
generations,sinceSirAdamBeckandOntario
Premier Sir James P . Whitney created the HydroElectric Power Commission of Ontario in 1906 .1
Initsbasicconstruction,theelectricitysystem
issimple.Fallingwater,steam,orwind,spinsa
turbine connected to a generator . The generator
createselectricitywhichistransmitted
through steel wires strung on towers and
poles . The electricity is transformed from
highvoltages(ashighas500,000Volts)down
todistributionvoltages(115,000Volts),then
intoneighbourhoodsanddowntoindividual
households (220 Volts) . When we turn on a
switch,thoseelectronsflowthroughthewiring
in our house into the bulb and light the room .
Whatmakeselectricityinterestingisthatthis
flowofelectrons—fromgeneratorsthroughout
theprovincetoeverycustomer—happens
virtuallyinstantaneously.
Thereare4.3millioncustomersinOntario,
andwhilecustomersdonotdoeverythingat
thesametime,therearesignificantandstrong
patternsofelectricityuse.Thesepatternsare
largely connected to the things we do more or
lessatthesametime,likegetti
ngup,cooking
breakfast,goingtowork,eatinglunch,going
home,doingthelaundry,washingdishesand
watchinghockeyonthetelevision.
The point in the system with which customers
havemostfamiliaritywillbethebillandthe
servicerelationshipwiththelocaldistribution
company.Manycustomersmayhavequestions
abouttheirbills,butthebillsthemselvescannot
explainallthechangesthathavetakenplace
in the system and what it all means . Bills do
notdoaparticularlygoodjobofexplaining
what the bill itself and all the lines on the bill
actually mean .
Thereisalotofinformationavailableabout
electricity in Ontario . This report compiles some
ofthatinformation,nottoadvocateforone
policyoranother,buttoprovidearesource—
focusedoncustomerinterests—tohelp
Ontariansparticipateinthepublicdebateabout
Ontario’s energy future .
About AmPCo
1ThepurposeofthatenterprisewastoexpropriatetheprivateinvestmentsontheOntariosideoftheNiagaraRiver,butalsotoissuebondsfor
theconstructionoftransmissiontoconnecttheturbinesatNiagaraFallstoexistingmunicipalelectricsystemsinsouth-westernOntario,including
London,Berlin(nowKitchener),andToronto.
[4]
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section 8: Lorem Ipsum
2
How Ontario Uses Electricity
“
Consumption is the sole end and purpose of all
production; and the interest of the producer
ought to be attended to, only so far as it may be
necessary for promoting that of the consumer.
”
AdamSmith(Scotti
shphilosopherandeconomist,1723-1790)
• The user profile of industrial energy consumers fluctuates less than residential
consumers. This is because the majority of industrial consumption is from machines
running at a constant rate.
• Residential consumers user profile is more volatile because heating, ventilation and airconditioning demand is dependent on weather. for example, air conditioning is run in
the summer to beat the heat—causing spikes in demand.
• ontario’s use of electricity used to peak in the winter due to home heating, now it peaks
in the summer due to air conditioning.
Engagingconsumersinconversationsabout
electricity requires understanding how
consumers use electricity .
toconsumeelectricity;theconsumptionof
electricity is a by-product of the decision to
watchtelevision.
Electricityconsumersvaryinsizefromindividual
residences,farmsandsmallbusinesses,tolarge
commercialbuildings,hospitalsanduniversities,
tothelargestindustrialfacilities.
Households typically contain more than one
personandindividualstendtoconsumeenergy
differently.Ahousehold’senergyconsumption
isintrinsictoahousehold’swayofliving,the
waythepeoplewithinthehouseholdinteract,
whattimetheygetup,howmanymembersof
thehouseholdarechildren,andsoon.Inmany
Ontariohomes,childrenmakealotofenergy
consumptiondecisions,likeforgetti
ngtoshut
Most customers do not actually set out to
consume electricity at all . Instead they consume
theservicesthatelectricityprovides—light,heat
andpower.Peopledonotturnonatelevision
Answering Customers’ Questions About eleCtriCity in ontArio
AMPCO booklet 6.indd 5
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11-12-01 4:46 PM
thefridgedoor,orleavingwindowsopenwhen
theairconditioningisrunning.
oftotalelectricalconsumptionformany
industries .”2
Electricitydemandbyhousehold,commercial
andinstitutionalcustomersexhibitanobvious
wavepattern,higherinthewinterandsummer
and lower in the spring and fall .
This means at least half of industrial energy
consumed powers electric motors for
pumps,fans,blowers,compressors,crushers,
conveyors,grinders,lifts,hoistsandother
applicationsofmotorsinindustry.Thisexplains
whyelectricityconsumptionbyindustrial
customersvariesmuchlessfromday-to-day
and hour-to-hour than other customers .
Industrialcustomersaredifferentfrom
householdandmostsmallbusinesscustomers,
not just because industrial users tend to use
moreelectricity—theydo—butbecausethey
usepowerdifferently.
AccordingtoNaturalResourcesCanada,“motordrivensystemsuse39%ofallelectricalenergy
consumedinCanada....Inthecaseofindustry,
wheremotoruseismoreprevalent,motors
consumeabouthalfofthetotalelectricity—and
thatfigurecangoashighasthreequarters
While Ontario consumers are able to access
powerinstantly,congestionisarealityofthe
system.Muchlikerushhourslowsdowna
daily commute costing commuters time and
money,congestionintheelectricitysystem
does the same . Ontario’s electricity grid is
adynamicnetwork,andwhenelectricity
demandspikesbottlenecksoccur,costing
InDUsTRy DEManD VERsUs LDC DEManD foR EnERGy
2NaturalResourcesCanada.Offi
ceofEnergyEffi
ciency.2004.EnerguideforIndustry.FactSheet.
[6]
AMPCO booklet 6.indd 6
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Section 2: How Ontario Uses Electricity
additional money to generate and deliver the
power required.
• Electricity demand is higher during the
In 2010, congestion cost each Ontarian $7.31, for
a total cost to the province of over $96 million.
Losses, on the transmission ($175 million) and
distribution ($190 million), added another $13.39
and $14.54 per Ontarian, a total of $35.27 per year
for every person in the province.
• Electricity demand rises most quickly
Total electricity consumption in Ontario has
declined steadily between 2001 and 2010.
• Electricity consumption down 7.2% since
2002, average annual reduction of 0.9%,
• Population grew by 12.7%,
• Ontario’s labour force grew by 12%,
• Ontario’s economy grew by 28.2%, with real
GDP up 10.5%, and
• S&P/TSX rose from 7000 in 2002 to as high as
12,000 in 2010, up 71.4%.
These numbers also indicate that Ontario has
become significantly more energy efficient, on
a kilowatt hour (KWh) per capita basis and kWh
per GDP basis, and that with increasing wealth
we can afford to do more.
Variations in Ontario’s total electricity demand
from year-to-year are linked to two key factors:
the economy, which affects industrial and
commercial demand, and seasonal weather
conditions, which drives demand for heating,
ventilation and air conditioning.
Variations in electricity consumption from dayto-day and hour-to-hour, however, follow clear
patterns according to the season, the day of the
week, and the hour of the day.
• Electricity demand is highest on the coldest
days in winter, hottest days in summer.
afternoon hours of working weekdays than it
is overnight.
between 6:00 a.m. and 11:00 a.m. each
morning, as people get up, get ready and
get to work, then falls at mid-day, rises again
slightly during the afternoon and falls most
quickly at 10:00 p.m. when people start
going to sleep.
Ontario used to be what is called a winterpeaking area, because the highest system
demands occurred during the winter. Ontario’s
urban population has grown, new suburban
houses now are almost always built with central
air-conditioning, and most new homes in urban
areas have natural gas for heating and hot
water. As a result, electricity consumption to
meet demands for heating has shrunk while
electricity for air-conditioning has grown.
Ontario is now a summer-peaking area.
While peak demands now predictably take
place during working weekday afternoons in
July and August, extreme peaks, such as those
experienced during the hottest days of summer
are rare and typically of short duration, lasting
only a few hours.
The all-time record for Ontario demand was set
on Tuesday, August 1, 2006, when peak demand
for electricity reached 27,005 megawatts (MW).
• On July 21, 2011, with a heat wave
breaking daily records in Ontario and
Quebec—37.9 degrees Celsius at Toronto’s
Pearson International Airport—demand
peaked at 25,450 MW at 3:00 p.m..
• The 10th highest peak demand hour in 2011,
on August 2, was 22,050 megawatts, lower
by 3,400 MW.
• Electricity is higher during working weekdays
than on weekends and holidays.
Answering Customers’ Questions about Electricity in Ontario
AMPCO booklet 6.indd 7
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TypICaL WEEKLy HoURLy DEManD pRofILE By sEason
20,000
18,000
16,000
14,000
Megawatts
12,000
10,000
Winter
8,000
Spring
Summer
6,000
Fall
4,000
2,000
0
Sun
Mon
Tue
Wed
Thu
Fri
Sat
[8]
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3
Who Does What
• ontario has a hybrid electricity system. Government continues to play a strong role
setting policy, regulation and directing procurement. at the same time, there is a viable
wholesale electricity market.
• The majority of the infrastructure is owned by the Government of ontario and municipal
governments, but there has been significant investment by private investors and a
growing share of the market is supplied by private sector owners and operators, under
contract to the Ontario Power Authority.
• The hybrid model has attracted significant new investment in ontario’s electricity
infrastructure and tempered the perception of risks of a fully open and competitive
marketplace.
• However, the absence of greater competitive market forces means there is little pressure
and almost no incentive for suppliers to control costs and improve customer service, and
little opportunity for third party and private merchant investment.
Investmentsinelectricityinfrastructure,supply
mixchoices,anddecisionsonratesandprices
havealwaysbeenshapedbypoliticalforces.
Despiteatrackrecordofcost-overruns,blown
schedules,andvolatilepolitics,formostofthe
pastcentury,Ontariohasenjoyedsomeofthe
lowest cost electricity in the industrial world .
since the early 1990s, even though the
governance and structure of the electricity
industry has become less centralized and more
complicated, its objectives remain:
• ensuringreliablesupply,
• promotingefficiency,
• maintainingthefinancialviabilityof
thesector,
•
•
•
•
protectingcustomers,
ensuringenvironmentalimprovement,
attractinginvestment,and
creatingjobs.
TheGovernmentofOntarioremainsasthesole
shareholderofOntarioPowerGenerationand
HydroOneNetworks,successorsofOntario
Hydro.Theover-archingpolicystructureset
outinOntario’selectricitylegislation(the
MinistryofEnergyAct,theElectricityAct,
andtheOntarioEnergyBoardAct)provides
aframeworkthatissuffi
cientlyflexibleto
allowmarketforcestoprevailbutinwhichthe
ultimateauthorityoftheCrowntodetermine
outcomesisexplicit.
Answering Customers’ Questions About eleCtriCity in ontArio
AMPCO booklet 6.indd 9
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With roles for market forces, regulation
and policy, Ontario has attracted significant
new investment in Ontario’s electricity
infrastructure. In doing so, concerns about the
lack of transparency and accountability that
come with a monopoly Crown corporation have
been addressed, and the perceptions of risk in
a fully open and competitive marketplace have
been tempered.
Without consistent policy direction and
effective coordination, and with multiple
agencies and competing agendas, the hybrid
structure is not immune from criticism. Costof-service regulation and long-term fixed price
contracts mute the investment discipline that
otherwise would come from market forces. And
in the absence of competition, there is little
pressure and almost no incentive for suppliers
to control costs and improve customer service.
Served by regulated monopoly utilities,
customers themselves suffer from the lack
of competition for their electricity business,
delaying the innovation, invention and
investment that flows from the market-based
opportunities that otherwise would exist in
an economic marketplace. By way of example,
there are virtually no private sector career
opportunities in customer engagement,
conservation and energy efficiency planning, or
program design and implementation. These jobs
are with few exceptions found only in provincial
agencies or municipally-owned utilities.
Ministry of Energy
The Ontario Ministry of Energy establishes
energy policy for the province, working to
ensure Ontario’s energy system functions
reliably and productively. According to the
Ministry, the “... top priority is ensuring
that Ontario’s electricity needs are met in a
sustainable manner.”3
The Ministry also has legislative responsibility
for several agencies, including:
• Independent Electricity System Operator
• Ontario Energy Board
• Ontario Power Authority
The Minister is the sole shareholder of:
• Hydro One
• Ontario Power Generation
Ontario Energy Board
The Ontario Energy Board is a quasiindependent, self-financing crown corporation.
The Board sets transmission and distribution
rates, and approves spending plans and fees for
the Independent Electricity System Operator
and the Ontario Power Authority.
The Board licenses all market participants
including the Independent Electricity System
Operator, generators, transmitters, distributors,
marketers, retailers and wholesale consumers.
The Ontario Energy Board has authority to
establish codes and guidelines for the sector. No
major transmission facilities may be constructed
without leave from the Board, and no person
may charge for distribution or transmission
services except as ordered by the Ontario
Energy Board.
The Market Surveillance Panel monitors
markets in the electricity sector and reports
via the Chair of the Ontario Energy Board
on the efficiency, fairness, transparency and
competitiveness of the market. It also reports
on any abuse or potential abuse of market
power. The Board may also be asked to review
the Independent Electricity System Operator
market rules and consider appeals of the System
Operator’s orders.
3 Ontario Ministry of Energy, “About the Ministry”, http://www.mei.gov.on.ca/en/about/
[1 0 ]
AMPCO booklet 6.indd 10
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Section 3: Who Does What
The Ontario Energy Board’s costs are
recovered indirectly from customers, via
levies on regulated natural gas and electricity
distribution companies, transmission companies
and regulated generators. The Board also
collects revenues from license application fees
and fines.
Independent Electricity
System Operator
The Independent Electricity System Operator is a
not-for-profit corporate entity established in 1998
by the Electricity Act of Ontario. Its major role
is to balance supply and demand for electricity
in Ontario and then manage power flows across
the province’s transmission interconnections
with system operators in other jurisdictions like
Manitoba, Michigan, New York and Quebec.
The Independent Electricity System Operator
is considered to be the hub of the electricity
wholesale marketplace. It connects all
participants: from the generators and suppliers
who sell electricity to wholesale consumers. The
System Operator determines the hourly price
of electricity through a market system where
market participants submit offers to buy or
sell electricity (a certain volume at a certain
price) and the Independent Electricity System
Operator dispatches generation, and directs
the grid, to meet customers’ demand. This
open, competitive market provides the critical
foundation for Ontario’s energy system.
The Independent Electricity System Operator
also coordinates emergency preparedness for
the province’s electricity system. They played
the lead role in managing the restoration of
power following the August 2003 blackout.
The costs of the Independent Electricity
System Operator are recovered directly from
consumers via a fixed surcharge of
$0.822/MWh.
Ontario Power Authority
Established in December 2004, the Ontario Power
Authority is responsible for long-term forecasting
and planning, ensuring an adequate supply of
electricity and achieving targets for conservation
and demand management in Ontario.
The Ontario Power Authority is also responsible
for the Feed-in Tariff or FIT Program. Created in
2009, the program provides stable, long-term
contracts for energy generated from renewable
sources like wind, water, solar and bio-energy.
The objective of the program is to encourage
the development and use of renewable power
resources. Currently, the FIT Program is divided
into two streams: FIT and micro FIT. FIT projects
generate over 10 kilowatts (KW) while micro FIT
projects generate less than 10 KW.
The costs of the Ontario Power Authority are
recovered directly from consumers via a fixed
surcharge of $0.551/MWh.
The payments made to generators via OPA
contracts are recovered from customers
through the Global Adjustment. (For more
information on the Global Adjustment, see
page 18.)
Ontario Electricity
Financial Corporation
The Ontario Electricity Financial Corporation
was established by the Electricity Act, 1998
as part of the restructuring of Ontario Hydro.
Its primary responsibility is to manage debt,
financial risks and liabilities, including the
debt of the former Ontario Hydro. It also
provides financial assistance to the successor
corporations of Ontario Hydro.
In its 2010/11 fiscal year, the Ontario Electricity
Financial Corporation reported net revenues of
$1.4 billion, reducing the Corporation’s unfunded
liability from $14.8 billion to $13.4 billion as
of March 31, 2011. The unfunded liability has
Answering Customers’ Questions about Electricity in Ontario
AMPCO booklet 6.indd 11
[11]
11-12-01 4:46 PM
declinedforsevenconsecutiveyears.Itis
$6billionlessthantheinitialunfundedliability
onApril1,1999,whentheformerOntarioHydro
wasrestructured.Totaldebtandliabilitiesare
$29.3billion,downfromthe$38.1billioninherited
bytheCorporationfromtherestructuring.The
strandeddebtwilllikelybedefeasedbetween
2015and2018,thesamerangethatwas
reportedinlastyear’sAnnualReport,andthe
DebtRetirementChargeisexpectedtoend
afterdefeasanceandnolongerbechargedon
consumers’ bills .4
electrical safety Authority
TheElectricalSafetyAuthorityisanot-for-profit
corporationcreatedbytheGovernmentof
OntarioundertheElectricityAct,1998.
The Electrical Safety Authority is responsible
for administering Ontario Electrical Safety Code
regulations,licensingelectricalcontractors
andmasterelectricians,electricitydistribution
system safety and electrical products safety .
TheElectricalSafetyAuthorityalsoworks
extensivelywithstakeholdersthroughoutthe
provincetoeducate,train,promoteandfoster
electrical safety .
4TheOntarioElectricityFinancialCorporation2011AnnualReport,http://www.oefc.on.ca/pdf/oefc_ar_2011_e.pdf
[1 2 ]
AMPCO booklet 6.indd 12
11-12-01 4:46 PM
4
Electricity Generation
• at its most basic, whether the source is nuclear, hydroelectric, fossil fuels or wind,
electricity is generated by transforming one kind of energy into a flow of electrons.
• In order to determine how much generation capacity is needed, experts need to
estimate the amount needed during peaks, which usually fall on hot summer days.
• ontario currently has 34,882 MW of installed generation capacity.5 The amount of
generation actually available at any one time is dependent on outages and the capacity
factor at each facility.
• natural gas is growing faster than any other generation type.
• a key component of the price for electricity is set in the wholesale power pool
administered by the Independent Electricity System Operator.
InsTaLLED GEnERaTIon CapaCITy In onTaRIo
40000
Biomass / Landfill
Gas
35000
Megawatts
30000
Wind
25000
Oil / Gas
20000
15000
Coal
10000
Hydroelectric
5000
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Nuclear
5“SupplyOverview”IESOhttp://www.ieso.ca/imoweb/media/md_supply.asp
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AMPCO booklet 6.indd 13
[1 3 ]
11-12-01 4:46 PM
Ontario’s Generation Supply Mix
Ontario’s current supply mix includes6:
Existing Capacity, as of May 2011
Fuel Type
Total
Capacity (MW)
Number of
Stations
11,446 (33%)
7,947 (23%)
4,484 (13%)
9,549 (27%)
1,334 (3.8%)
5
71
4
28
10
122 (0.3%)
6
34,882
124
Nuclear
Hydroelectric
Coal
Oil / Gas
Wind
Biomass / Landfill Gas
Total
Hydro-Electricity
Hydroelectric generation accounts for 23% of
Ontario’s generating mix. There are currently
about 180 hydroelectric stations (of which 71
are connected to the grid) in Ontario, the size of
each varies considerably. The smallest stations
can produce less than one MW of power, while
Ontario’s largest, Niagara Falls’ Sir Adam Beck 2
Generating Station, has a generation capacity of
over 1,400 MW of electricity.
Nuclear
Ontario’s nuclear fleet provides approximately
11,500 MW of generating capacity.
Nuclear plants produce over 50% of Ontario’s
electricity. There are three nuclear power
plants in Ontario: Pickering Generating Station,
Darlington Generating Station and Bruce Power.
All three nuclear power plants are owned by
Ontario Power Generation, which is owned
by the Province of Ontario. The Bruce Power
facility is privately operated by the Bruce Power
Limited Partnership under a long-term lease
from Ontario Power Generation.
Compared to other generation technologies,
nuclear generation in Ontario is relatively
non-maneuvrable, meaning that the ability to
vary production up and down to respond to
changes in demand is limited. Some units, such
as those operated by Bruce Power, can provide
limited levels of maneuvrability by releasing
steam, continuing to operate the reactors while
bypassing the generators.7
Natural Gas
Natural gas generation capacity increased
significantly since 2007 and currently accounts for
approximately 27% of Ontario’s generating mix.
New plants constructed since 2002 include:
• Sarnia Regional Cogeneration Plant
(440 MW) - Sarnia
• Brighton Beach Power Station (540 MW)
- Windsor
• Goreway Station (840 MW) - Brampton
• Greenfield Energy Centre (1,000 MW) - Sarnia
• Halton Hills Generating Station (640 MW)
- Halton Hills
• Portlands Energy Centre (550 MW) - Toronto
• St. Clair Energy Centre (580 MW) - Sarnia
6 Generating resources as measured by the IESO on May 24, 2011.
7 “The Ontario Reliability Outlook” IESO p.7
[1 4 ]
AMPCO booklet 6.indd 14
11-12-01 4:46 PM
section 4: Electricity Generation
Oneotherplantisunderdevelopmentand
construction:
• YorkEnergyCentre(390MW)-Northern
YorkRegion
There are currently about 60 natural gas
stationsofvaryingsizes,ofwhich28are
connected to the transmission grid . The
remainder are embedded within local
distributioncompanies’serviceterritories.Asof
December31,2010,Ontariohas9,549MWof
naturalgas-firedenergygeneration.
The Ontario Power Authority contracted with
TransCanada Power for a natural gas plant
ontheFordMotorCompanysiteinOakville
(560MW),andwithEasternPower(the280MW
GreenfieldSouthPowerPlant)inMississauga.
TheGovernmentofOntariosubsequently
decidedtheseplantswerenotneeded,atleastin
thelocationsoriginallycontracted.Thestatusof
thesecontractsarenotpubliclyknown.
How do we
measure electricity?
•
•
•
•
•
•
CoAl
Ontariocurrentlyhasfourcoal-firedfuel
stations:Nanticoke,Lambton,Thunder
BayandAtikokan.Togethertheyaccount
forapproximately13%ofOntario’s
generatingcapacity.
•
•
TheGovernmentofOntariohasdirectedthe
Ontario Power Authority to plan for coalfiredgenerationinOntariotobereplacedby
cleanersourcesbytheendof2014.Inkeeping
withthispolicy,coal-firedgenerationwas
reduced by nearly 13 .5 TWh in 2009 . In the
electricitysector,theterm“capacityfactor”is
usedtoexplaintheutilizationrateofanasset.
Ontario’scoalplantshaveacombinedinstalled
generationcapacityof4,484MW,fromwhich
onaveragelessthan1,000MWofelectricity
isbeinggenerated,meaningweareusingless
than30%ofexistinggeneration.Coal’sshare
hasdeclinedto6.9%oftheelectricitymarket.
•
•
•
Answering Customers’ Questions About eleCtriCity in ontArio
AMPCO booklet 6.indd 15
[1 5 ]
11-12-01 4:47 PM
wind
Windcapacityhasincreasedsubstantially.In
2009,windgenerationincreasedby1.05TWh,
up67%fromits2008level,whileitsoverall
capacity increased by 44% from 2008 to 2009 .
InkeepingwiththeProvinceofOntario’sfocus
ongreenenergyinitiatives,thecurrentpolicy
givesprioritytoenergyproductionfromwind
facilitieswhenevertheyareavailable.
solAr
Hourly ontario energy Price
While most customers’ bills show the cost
ofelectricityasasingleblendedcost,the
“electricity”lineonresidentialcustomerbills
isactuallycomprisedoftwodifferentcosts:(1)
the cost of producing electrical energy to meet
customers’needsateverymomentintime,and
(2)thecostofthegenerationcapacityneeded
tomeetcustomers’expectedneedsduring
peaktimes.
Mostsolargeneratingfacilitiesaresmalland
producerelativelylowamountsofelectricity,
meaningthatsupplydataisnotreadilyavailable
from the Independent Electricity System
Operator.Wecan,however,extrapolate
solargenerationbasedonhoursofdaylight,
estimatesofcloudcover,andinstalledsolar
generationcapacity.
The electricity system in Ontario is a hybrid
betweenamarketsystemandaregulated
system.Themarketcomponentisoperatedby
the Independent Electricity System Operator
andactuallyconsistsofseveralmarkets,the
mostsignificantofwhichisthereal-time
wholesaleenergymarket.
Thehoursofdaylightvary.Thisreflectsthe
geometryoftheangleoftheEarth’saxisandits
rotationaroundthesun.Ontariansliveinthe
northernhemisphere,whichisinclinedtowards
the sun during what we call the summer
months.(InAustralia,thepatternwould
be opposite .)
Thereal-timemarketoperateslikeapool
intowhichgenerators,othersuppliersand
customerssubmithourlyofferstosupply
energy.Generatorssubmitthree-partoffersto
supplyenergyintothemarket:(1)aminimum
costtostart-upthegenerator,(2)avolumeof
energytheyarewillingtosupply,and(3)aprice
at which they will supply it .
Eventhoughthetotalradiationreceivedon
Earthfromthesunisconstant,solarinsolation
atgroundleveldependsonhumidity,cloud
cover,andotherthingsthatblockthesun,like
mountains,treesandtallbuildings.
generation
The Independent Electricity System Operator
manages a computer system (called the Dispatch
ScheduleOptimizer)thatranksalltheoffersfrom
generatorsfromlowesttohighest,andsetsthe
pricebasedontheleastcostlycombinationof
generatorofferstomeetdemandatanygiven
momentintime.Infact,theSystemOperator
alsodispatches,setsthemarketclearingprice,
andsettleswithgeneratorsevery5minutesor
12timeseveryhour.Theaverageofthese12
5-minutemarket-clearingpricesineachhouris
theHourlyOntarioEnergyPrice(the“HOEP”)that
ispaidtogeneratorsandchargedtocustomers,
andreflectsthesystem-wideaveragecostof
generatingelectricalenergytomeetdemandin
each hour .
[1 6 ]
AMPCO booklet 6.indd 16
11-12-01 4:47 PM
section 4: Electricity Generation
TotheendofSeptember2011,107.21TWhof
energy was supplied into the Independent Electricity
SystemOperatorwholesalemarketatanaverage
priceof$31.16perMWhforatotalof$3,341million.
demand-side resources
operating reserve
Inadditiontoadministeringthewholesale
electricitymarket,theIndependentElectricity
SystemOperatoralsooperatesmarketsfor
operatingreserve.Essentially,operatingreserve
isprovidedbyfacilities(anddemand-side
resources)thatmakethemselvesavailable,
runningatalowleveloronstandby,tobe
calledontogenerateelectricityquicklyif
needed.Operatingreservescanalsobefreedup by electricity customers who are contracted
toordecidetoforegoconsumptionatcertain
timestohelpreducedemandduringsystem
peakhours.Thishasanadditionalbenefitof
savingmoneybyreducingconsumptionwhen
pricesarepeaking.
Thereasonallelectricitymarketsneedto
haveacertainamountofreserveissimply
because electricity is produced and consumed
instantaneously.Anyvariationsindemand,or
suddenlossesinsupplyduetoanunexpected
outageorequipmentfailure,mustbemetin
realtime.Requirementsforoperatingreserve
inOntarioareactuallydeterminedbyanentity
calledtheNorth-EasternReliabilityCouncilin
which Ontario’s Independent Electricity System
Operatorparticipatesalongwithothersystem
operatorsandutilitiesintheNorth-Easternpart
of North America .
Congestion management
settlement Credits
ThedesignofOntario’selectricitymarketis
notexactlylikeelectricitymarketsinadjacent
jurisdictions.Oneofthekeydifferencesstems
from Ontario’s policy of a uniform price for
allOntarians.Althoughthecalculationsare
exceedinglycomplicated,theHourlyOntario
Energy Price is basically calculated as if there
werenocongestiononthegrid,wheninfact
thegridisadynamicnetworkwithfrequent
bottlenecksbetweenonepointandanother.
Theupshotoftheuniformpricingpolicyisthat—
although the Independent Electricity System
Operatorsetsthepricebasedonacalculation
ofthelowestcostcombinationofgeneratorsto
meetdemandatanypointintime—theSystem
Operatoractuallydispatchesgenerationand
directgridoperationstoaccommodateactualgrid
conditions,workingaroundconstraints,tomake
sure that customers’ demands are met .
The Independent Electricity System Operator
makespaymentstogeneratorsbasedonthe
amountofmoneytheywouldhaveearned(had
therebeennocongestionandtheywereable
to operate on a purely economic basis) and
whattheyactuallyearned(whenthecongestion
wasfactoredin).Thedifferenceismadeupin
paymentstothegeneratorscalledCongestion
ManagementSettlementCredits.Froma
customer’sperspective,theseCongestion
ManagementSettlementCreditscanbethought
ofasthecostofcongestiononthegrid.
Thetotalcostofcongestionin2010wasover
$96 million .
AsoftheendofSeptember2011,thetotal
ofweightedaveragehourlyupliftsettlement
chargestowholesalecustomers(covering
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AMPCO booklet 6.indd 17
[17 ]
11-12-01 4:47 PM
costs for operating reserve and congestion
management) since January 1, 2011 was $180
million or $1.68 per MWh.
Global Adjustment
The Hourly Ontario Energy Price represents
the marginal cost of supply in the market to
meet electricity demand in each hour. It does
not cover the fixed cost of generation. These
costs include capital costs, and operating and
maintenance costs required to ensure that
generation is available to produce energy to
meet peak demand. In fact, there are rules that
apply to all electricity systems in North America
that require that generation capacity needs to
be built to supply demands during expected
peak times, plus a “reserve margin” of 12 to
15% of additional generation capacity to be
available just in case.
In Ontario, the fixed costs of generation
capacity are paid to generators through
a variety of regulated rates and contract
payments. These costs are recovered from
customers according to regulations made by the
Ontario government as an adjustment to the
wholesale energy prices paid by customers. The
adjustment is called the Global Adjustment.
The Global Adjustment is the difference between
the total payments made to certain contracted
or regulated generators and the costs of demand
management projects, and any offsetting market
revenues. The Global Adjustment therefore
operates like a contract for differences between
average generator capacity costs and the Hourly
Ontario Energy Price.
As of the end of September 2011, the total
Global Adjustment amount for 2011 was $3,861
million, $36 per MWh on average year-to-date.
Prescribed Base Load Generation
The Ontario Energy Board Act, 1998 authorizes
the Ontario Energy Board to determine the
amount of money that is paid to Ontario
Power Generation for power generated by
specific “prescribed generation facilities”.
These facilities are the nuclear generating
stations operated by Ontario Power Generation
(Pickering and Darlington) and the baseload
hydroelectric generation facilities (De Cew I,
De Cew II, Sir Adam Beck I, Sir Adam Beck II, Sir
Adam Beck pump storage generating station
and R.H. Saunders).
In its most recent decision, on March 10, 2011,
the Ontario Energy Board approved an annual
revenue requirement of $1,435.7 million for
the regulated hydroelectric facilities and $5,473
million for the nuclear facilities, for a total revenue
requirement of $6,906.60 million per year.
The hourly payment amount was set at $37.38
per MWh for hydroelectric facilities and $55.34
per MWh for Ontario Power Generation’s
nuclear facilities.
Bruce POwer refurbishment
Located on Lake Huron in Tiverton Ontario,
Bruce Power is the largest nuclear facility
in North America. It is home to the Bruce A
and B generating stations, each holding four
CANDU reactors. Each facility has a capacity of
approximately 3,200 MW, although two units
are currently being refurbished in Bruce A. They
are expected to be back online in 2012.
The Bruce A and B partnerships operate
according to power supply contracts with the
Ontario Power Authority. The Bruce A contract
provides a floor price and other contract
payments. The Bruce B contract provides a
floor price for all its output. In 2010, the Bruce
partnerships together earned revenues of
$2,324 million, $65 per MWh on average for
Bruce A, and $58 per MWh for Bruce B.8
Clean Energy StandARD
Offer Program
The Clean Energy Standard Offer Program
was launched in 2008 with the objective of
[1 8 ]
AMPCO booklet 6.indd 18
11-12-01 4:47 PM
Section 4: Electricity Generation
supporting small, clean energy generators
already connected to a distribution system. The
program was intended to encourage the use
and development of clean energy technologies.
Under the program, generators with a capacity of
10 MW or less were awarded a 20-year term contract
as a way to encourage embedded generation.
The program was intended to compliment the
Renewable Energy Standard Offer Program. It
was replaced by the Feed-in Tariff Program on
October 1, 2009. Renewable Energy Standard
Offer Program
The Renewable Energy Standard Offer Program
was introduced in 2007 with the goal of helping
Ontario meet its renewable energy supply
targets by providing a standard pricing regime
and simplified eligibility, contracting and other
rules for small renewable energy electricity
generating projects.
To be eligible for the program, projects must be
located in Ontario and generate electricity from
wind, solar, thermal electric solar, renewable
biomass, biogas, biofuel, landfill gas or waterpower.
The program had considerable interest and
participation, contracting over 1,000 MW of
projects within the first year.
The Renewable Energy Standard Offer Program
was replaced by the Feed-in Tariff Program on
October 1, 2009. Feed-In Tariff Contracts
The Feed-in Tariff (FIT) Program was created
by the Green Energy and Green Economy Act,
2009 and is operated by the Ontario Power
Authority. The program offers fixed prices for
long-term contracts for energy generated from
renewable sources.
The FIT Program is divided into two streams: FIT
and microFIT. FIT projects generate over 10 KW
while microFIT projects generate less than 10 KW.
As it has progressed, approximately 2,500
medium and large contracts have been offered
and over 11,000 microFIT projects have been
contracted. While this represents enough
electricity to power almost 1.2 million homes,
many of these projects are not yet connected to
the electricity grid.
The Government of Ontario began a review of
the FIT program in 2011, considering:
• FIT pricing – to balance the interests of
ratepayers. Lower FIT prices are expected.
• New technology – to consider new and
emerging generating technology.
• Governing policy and outreach techniques.
Conservation Programs
and Incentives
The Ontario Power Authority also operates
and participates in various Conservation
and Demand Management programs. These
initiatives are part of a larger plan to meet
demand reduction targets by encouraging
energy conservation.
The Ontario Power Authority procures
conservation resources through four different
conservation categories:
• Energy efficiency: using technologies that
provide the same level of service but use less
energy (e.g., compact fluorescent light bulbs)
• Demand response/conservation behaviour:
reducing or shifting electricity demand (e.g.,
turning off lights, load shifting)
• Fuel switching: switching from electricity
to another fuel for a given application (e.g.,
electric water heater to gas water heater)
8 http://www.transcanada.com/investor/annual_reports/2010/common/pdfs/2010_TCC_AR_Eng.pdf
Answering Customers’ Questions about Electricity in Ontario
AMPCO booklet 6.indd 19
[1 9 ]
11-12-01 4:47 PM
• Customer-basedgeneration:reduced
Otheractivities,ofteninpartnershipwith
LocalDistributionCompaniesorHydroOne,
includebillinserts,newspapers,specialevents,
conferencesandworkshops,radioandTV
series,factsheets,energyeffi
ciencyguides,
brochures,onlineenergyauditsanddirectmail
topromoteenergyeffi
ciencyandconservation.
demandforelectricityfromthegrid,
duetoon-sitegeneration(e.g.,solar
photovoltaicpanels)
TheOntarioPowerAuthorityprovidessome
informationontherangeandweighted
average$/MWhcostforprograms,groupedby
conservationcategory,therangeof$/MW/yr
costforprograms,groupedbyconservation
category,andforcustomer-basedgeneration,
thethreefixedcosts($/MWh)availablewithin
theRenewableEnergyStandardOfferProgram
(RESOP)arealsoshownasapointofreference:
debt
Thedebtretirementchargeonconsumers’bills
wasputinplacetopayoffthedebtcreatedby
the defunct Ontario Hydro .
OntarioHydro’sso-called“strandeddebt”
is held by the Ontario Electricity Financial
Corporation.WhentheCorporationwas
createdin1998,itinherited$38.1billionin
debt.TheCorporation’slatestannualreport
showsthedebtnowstandsat$13.4billion,
havingbeenreducedbyover$1billioninthe
last year alone .
• Energyefficiency:$8–$150perMWh
• Customer-basedgeneration:$100–$420
per MWh
• DemandResponse/ConservationBehaviour:
$19 – $105 per MW per year
The Ontario Power Authority also sponsors
communicationsandmarketinginitiatives:
Consumers help pay down this debt with
chargesof$7oneverymegawatt-hour
consumedinOntariosinceMay1,2002.Asof
theendofSeptember2011,$750millionhas
been collected so far this year .
• Conservationawarenessactivitiessuchas
EnergyConservationWeek
• ConservationAwarenessDayatRogers
Centreandmediaevents
Ontario Hydro’s stranded debt is also being
paidbydividends,proxytaxesandpaymentsin-lieuoftaxes,byOntarioPowerGeneration,
Hydro One and municipally owned Local
DistributionCompanies.
• Marketresearch
• Educationandtrainingactivities
• TheConservationFundandTechnology
DevelopmentFund
WHERE yoUR ELECTRICITy DoLLaR GoEs
$0 .09
$0 .13
$0 .05
$0 .06
$0 .36
Global
Adjustment
Distribution
Hourly Ontario
Energy Price
Regulatory
Transmission
Debt Retirement
Charge
$0 .30
[20]
AMPCO booklet 6.indd 20
11-12-01 4:47 PM
5
Transmission
• Hydro one networks owns and operates 97% of the transmission lines in ontario.
• about 6.5% of electricity is ‘lost’ as it travels over wires and transformers, from
generators to customers.
• Losses are highest during periods of peak demand.
Thehighvoltageelectricitytransmission
systemisthebackboneofOntario’spower
system . The purpose of the transmission
system is to conduct electricity between supply
points(generators)anddeliverypoints(Local
DistributionCompaniesandendusecustomers).
Ontario’sinterconnectionwithneighbouring
jurisdictionsallowspowertobeimportedinto
Ontariofordomesticconsumptionandallows
Ontariogeneratorstoexportpowerforuseby
customersoutsidetheprovince.
Transmissionconstruction,operatingand
maintenancecosts,andrateschargedto
customers are regulated by the Ontario
Energy Board .
• FiveNationsEnergyInc.(270kmof
transmission line)
• CanadianNiagaraPowerInc.(32kmof
transmission line)
Hydro One Networks Inc.
The transmission system operated by Hydro
One (formerly part of Ontario Hydro) comprises
about97%ofOntario’slicensedfacilitiesbased
onkilometersoflines,customersandrevenues.
TheprovincialgovernmentisHydroOne’s
sole shareholder .
• HydroOneNetworksInc.(29,000kmof
HydroOne’ssystemincludes29,000kmof
highvoltagetransmissionlinesacrossthe
provinceand280transmissionstations.The
system carries electricity to 133 large industrial
customersand79LocalDistributionCompanies.
Hydro One also owns and operates 26
interconnectionswithneighbouringprovinces
andstates,whichallowelectricitytoflow
betweenOntarioandManitoba,Minnesota,
Michigan,NewYorkandQuebec.
• GreatLakesPowerLtd.(644kmof
Hydro One is also connected to the three other
transmittersrepresentingtheremaining3%
trAnsmission oPerAtors
There are four main transmission companies
in Ontario that are currently licensed and
regulatedbytheOntarioEnergyBoardtoown,
operateandmaintaintransmissionfacilities:
transmission line)
transmission line)
Answering Customers’ Questions About eleCtriCity in ontArio
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500kVLineRoute
230kVLineRoute
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section 8: Transmission
ofthelicensedfacilitieswithinOntario(Great
LakesPowerLtd.,FiveNationsEnergyInc.and
Canadian Niagara Power Inc .) .
electricitytransmissionanddistribution
lossesaverageabout7%oftheelectricity
thatistransmittedintheUnitedStates.9 In
Ontario,transmissionanddistributionlosses
average6.5%.
In2011,HydroOneNetworksisapprovedto
collect$1,300millioninrevenueon$7,853
millioninassets(its“ratebase”),basedon
2011forecastconsumption,$7.78perMWh
onaverage.
Whilelossesaverageabout300MW(based
ondatafrom2010),andvarypredictablyfrom
hour-to-hour and day-to-day as demand rises
andfalls,lossescanrangefromnearzerotoas
highas1,800MWwhendemandisatitspeak.
In2010,transmissionlossesrepresented2%
oftheelectricitygenerated,costingOntario
consumers $175 million .
losses
Losses occur as a natural phenomenon when
electricityistransmittedbetweentwopoints.
The physics of electricity means that losses
riseexponentiallyasthecurrentonacircuit
increases.Fortheelectricitygrid,thismeans
basically that losses are highest when demand
is highest .
Distributionlossesvarywidelybydistribution
company.In2010,accordingtoinformation
reportedbytheOntarioEnergyBoard,total
distributionlossesaccountedformorethan
5TWhofelectricity,$190million10 worth
of electricity .
According to the United States Energy
InformationAdministration,national,annual
20,000
$50
18,000
$45
16,000
$40
14,000
$35
12,000
$30
10,000
$25
8,000
$20
6,000
$ per megawatt/hour
Hourly Megawatts
aVERaGE HoURLy DEManD, LossEs anD WHoLEsaLE pRICEs
$15
Average Net Hourly Demand
4,000
$10
Transmission Losses
Average Hourly Ontario Energy Price
2,000
$5
0
$0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
9U.S.EnergyInformationAdministrationhttp://www.eia.gov/tools/faqs/faq.cfm?id=105&t=39
10Assuming2010averageannualHOEPof$36.25/MWh.http://ieso.ca/imoweb/pubs/marketReports/monthly/2010dec.pdf
Answering Customers’ Questions About eleCtriCity in ontArio
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6
Distribution
• Hydro One Networks serves
1.3 million Ontario customers in
mostly rural areas.
• Most local distribution companies
are owned by municipalities.
LocalDistributionCompaniestakeelectricityfrom
thetransmissiongrid,transformthatpower,and
deliverittohomes,farms,schools,hospitalsand
business customers across Ontario .
loCAl distribution ComPAnies
Ontario’s78LocalDistributionCompaniesare
responsibleforthesafeandreliabledistribution
ofelectricitywithinlocalcommunities,andhave
anobligationtoprovideelectricityserviceto
customersintheirservicearea.LocalDistribution
Companiestypicallyarecustomers’firstpoint-ofcontactonelectricitymattersthroughlocalhelp
desks,emergencyresponseandbilling.
MostLocalDistributionCompaniesareowned
bymunicipalitieswithafewremainingprivate
companies.HydroOneNetworksInc.isthe
largest,servingover1.3millioncustomersin
mostly rural areas .
LocalDistributionCompaniestakepower
fromthewholesaleelectricitymarket,viathe
transmissiongrid,tomeetcustomers’demand.
Inafewcases,LocalDistributionCompanies’
serviceareasareembeddedinsideother
distributioncompanies,sotheelectricityflows
fromsurroundingLocalDistributionCompanies.
Wholesale electricity cost and transmission
chargesareflowedthroughtocustomers
withoutmark-up.
In2010,LocalDistributionCompaniescollected
$3,053milliontotalrevenueonanassetbaseof
$16,218million(ofwhich$5,467isshareholder
equity),onaverage,basedon2010total
consumption,$21.11perMWh.
smArt meters And tHe smArt grid
Ontarioisworkingtobuildasmartgrid
systemtocreateamoreeffi
cientandcosteffectiveelectricalsystem.Thesmartgridwill
speedinnovationintheelectricitysector.
The Independent Electricity System Operator
describesthesmartgridas“theuseof
informationandcommunicationstechnologies
tobettermanagetheproduction,storage,
deliveryandconsumptionofelectricity.”11
ForOntarioconsumers,thesmartmeteristhe
mosttangibleevidenceofthesmartgrid.Smart
metersarenowinstalledonvirtuallyeveryhome
intheprovince.Withthesmartmeter,consumers
areabletogetbetterinformationabouthowand
whentheyuseelectricity.Aswell,withsmart
metersnowcommonplace,theOntarioEnergy
Boardhasbeenabletointroducetime-of-use
pricingintheprovince.Today,therearethreetiers
forpricing:thehighestforon-peakperiods,the
lowestforoff-peakandamid-tieredpriceduring
mid-peakperiods.
11IESONewsReleasehttp://www.ieso.ca/imoweb/media/md_newsitem.asp?newsID=5674
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ANSWERING CUSTOMERS’ QUESTIONS ABOUT
Electricity in Ontario
DECEMBER 12, 2011
Visit us at www.ampco.org
Call (416) 260-0280
AMPCO booklet 6.indd 3
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