“Hydro” is a term widely used in Ontario referring to electricity and the electricity sector. The term’s history traces back to the 1800’s with the invention of the Pelton turbine which was designed to extract energy from moving water. In 1906 with most of the world’s electricity being generated from water flow (hydro) the first Ontario power company was created as the “Hydro Electric Power Commission of Ontario” (HEPCO) .
In the 1950’s the province’s energy needs had exceeded hydro-electric capacity and Ontario began building coal-fired generation. In the 1970’s Ontario’s economic growth drove the development of nuclear generation. In 2018 Ontario’s energy is derived mostly from nuclear generation. Hydro provides less than 25% of our energy needs.
While the Ontario industry is most commonly referred to as ‘Hydro’ it is not where we get most of our energy from.
In 1974 Ontario Hydro was created as a crown corporation to manage generation, transmission and rural electricity distribution. Local distribution was managed by over 300 municipal utilities under the jurisdiction of Ontario Hydro.
The term ‘Hydro’ was well recognized and was used until the break-up of the crown corporation into 5 separate entities in 1998.
(1) the Ontario Electricity Generation Corporation (“Genco”);
(2) the Ontario Electric Services Corporation (“Servco”);
(3) the Independent Electricity Market Operator (“IMO”);
(4) Ontario Hydro Financial Corporation (“Debtco”);
(5) the Electrical Safety Authority (“ESA”)
Following the Ontario Hydro break-up one of the successor companies (Servco) chose to rename itself to include the term ‘Hydro’ in the corporate name – Hydro One. Genco changed its name to Ontario Power Generation. The IMO became the Independent Electricity System Operator (IESO).
Hydro One retained the Transmission and Distribution business of the former Ontario Hydro. A Telecommunications subsidiary was formed in 2000 to market spare capacity in the power system fiber optic network. Hydro One is the second largest of the successor companies behind Ontario Power Generation (OPG).
As part of the 1998 industry restructuring, the municipal utilities were required to incorporate and operate independently of other formerly integrated services. The cost of incorporating and adapting to the new industry structure led to many mergers and a substantial reduction in the number of Local Distribution Companies (LDCs). Consolidations are ongoing and there are fewer than 70 LDCs remaining in Ontario today.
32 of 67 LDCs used the term ‘Hydro’ in the company name in 2016.
More than 30 privately owned generator sites have the term ‘Hydro’ associated with them.
What Hydro isn’t
The term ‘Hydro’ is no longer a representative term for the electricity industry in Ontario and seems to cause confusion among many ratepayers as evidenced by social media.
It may refer to a commodity or any one of over 60 different companies.
So… what is Hydro One?
It is a common misconception that all aspects of Ontario’s electricity sector are managed by Hydro One. It doesn’t.
Hydro One is one of over 60 electricity delivery companies in Ontario. It has high-voltage transmission, distribution and telecommunication assets. Electricity delivery companies are regulated by the Ontario Energy Board.
Hydro One does not generate electricity or set commodity prices.
There are a large number of players in the industry today that play a role in providing electricity to consumers. It is only the high-voltage transmission service that most Ontario electricity users get from Hydro One as they own and operate more than 90% of high voltage lines in the province.
Hydro One Distribution has most of the rural customers and a small number of higher density urban customers from acquired distribution companies. Only one in four ratepayers are Hydro One distribution customers.
Hydro One Distribution manages the most geographically diverse and lowest density customers in the province but is only one of more than 60 Local Distribution Companies.
So… Hydro One is a delivery company with a share in the business of connecting generators to load customers. It doesn’t generate electricity or set commodity prices. The rates that Hydro One charges for the services it provides are set by the Ontario Energy Board.
The breakdown of the various categories bundled into an electricity bill are shown in my Electricity Service Cost article.
Derek
