Ontario Hydro

Sir Adam Beck Hydroelectric Power Stations

Extent of Hydro's generating and transmission network (1919)

In May 1906, the Hydro-Electric Power Commission of Ontario ("Hydro" or "HEPCO") was formed[6] and its first commissioners were Adam Beck, John S. Hendrie, and Cecil B. Smith,[7] HEPCO was a unique hybrid of a government department, crown corporation and municipal cooperative that coexisted with the existing private companies. It was a "politically rational" rather than a "technically efficient" solution that depended on the watershed election of 1905.[8]

On January 1, 1907, referendums in Toronto and 18 other municipalities approved the provisional contracts that their councils had concluded with HEPC,[9] and subsequent referendums one year later authorized utility bond issues for the construction of local distribution systems.[10] The victories in Toronto were in large part due to the leadership and commitment of Adam Beck's ally, William Peyton Hubbard.[11] The first transmission lines began providing power to southwestern Ontario in 1910. Berlin (Kitchener) would be the first city in Ontario to get hydroelectric power in long-distance transmission lines from Niagara Falls, on October 11, 1910.[12]

The commission's process of expansion was from municipality to municipality, generally in the following manner:[13]

• the municipal council would approach the commission, expressing its interest in establishing a local distribution system;
• Hydro engineers would then visit the municipality to assess current facilities and probable total load, before producing estimates as to the total cost of extending transmission lines to the municipal boundary, the delivered price of power, and building or upgrading the community's distribution system;
• if the council agreed, a provisional contract would be negotiated between the council and the Commission, subject to ratification by the voters;
• upon successful ratification, thirty-year debentures would be issued by the municipality to cover construction and equipment expenses, and Hydro would then build a tie line to the nearest point in its network.

During the 1920s, Hydro's network expanded significantly:

• In September 1921, Hydro acquired the Toronto Electric Light Company and various railway interests, making it the largest electric power system in the world,[14] and legislation passed in 1922 provided that any claims arising before December 1920 against the acquired companies or their properties, if not notified to the Commission in prescribed manner and pursued on or before October 1, 1923, would "be forever barred."[15]
• In 1921 and 1924, legislative amendments authorized grant-in-aid programs that encouraged rural electrification in Ontario by reducing unit rates in the areas to be served.[16]
• By the end of the 1920s, most remaining private power producers were unable to withstand any expansion by Hydro into their service area, and some survived only because Hydro did not see the need to enter their markets.[17]

Abitibi Canyon Generating Station

In 1926, the Ferguson government gave its approval for Abitibi Power and Paper Company to develop the Abitibi Canyon, the largest such development since the Niagara River, in preference to incurring more debt for Ontario Hydro.[18] The development was encouraged through secret commitments for long-term purchases of electricity and indemnification of Hydro against any losses.[18] Questions were asked at the time as to how the additional 100,000 horsepower (75,000 kW) in capacity would be used, as there were virtually no customers for it.[19] When Abitibi was placed in receivership in 1932, legislation was passed over the following years to allow Ontario Hydro to take control of several Abitibi power developments.[lower-alpha 1] Certain dealings relating to the 1933 acquisition came to be known as the "great Abitibi swindle,"[21] which resulted in the fall of the Henry government in the 1934 Ontario election, to be succeeded by that of Mitchell Hepburn.[21]

In 1939, the commission was given authority to regulate all other electricity generators, thus bringing all private utilities in the province under its supervision. It also received authority to acquire any utility that was not producing at its capacity.[22][23]

In 1948, HEPCO changed most of its system from 25 Hz to 60 Hz. However, the Fort Erie area south of Niagara Falls stayed on the remaining 25 Hz generators until 1966, and this area had electricity throughout the 1965 Eastern Seaboard Blackout.

By the 1950s the commission was operating as a single integrated system. As demand rose in the post-war period, Ontario Hydro started expanding its generation system bringing on line many new hydroelectric stations. In 1953, Ontario Hydro began to interconnect with other utilities, the first interconnection being the Keith-Waterman line in Windsor which crosses the Detroit River to Detroit, Michigan interconnecting with Detroit Edison in the United States. This line was originally constructed at 120,000 volts and was later upgraded to 230,000 volts in 1973. Shortly thereafter, other interconnections with New York State were built. The first coal-fired generating stations in the system were also built in this period. The expansion of coal continued during the 1960s and 1970s but was overtaken by the development of nuclear power.

In 1974, the commission was reconstituted as a crown corporation known as Ontario Hydro,[27] which had been the commission's nickname. In many Canadian provinces, including Ontario, hydroelectric power is so common that "hydro" has become synonymous with electric power regardless of the actual source of the electricity.

On March 31, 1999, Ontario Hydro reported in its financial statements that it had long term debts of $26.2 billion and assets totalling $39.6 billion.[40]

The fair value of its assets was substantially less than the $39.6 billion reported in the 1999 financial statements and therefore, in order to ensure the successor entities were financially solvent, the reorganization gave rise to $19.5 billion of stranded debt.[41] The stranded debt was the shortfall between the fair value of Ontario Hydro's assets and the value of Ontario Hydro's total debt and other liabilities transferred to the new entities.[42]

Since 2002, the stranded debt is being paid down through a Debt Retirement Charge levied upon Ontario ratepayers.[43][44][45] The Debt Retirement Charge is 0.7 cents per kilowatt hour (kWh) of electricity consumed in Ontario.[46]

As of March 31, 2014, the remaining stranded debt was $2.6 billion.[47] Beginning in 2016, the Ontario government removed the Debt Retirement Charge from residential electricity users’ electricity bills, and from all other electricity users’ bills until April 1, 2018.[47]