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Ontario's Energy Marketplace: The Big Picture
- Powering our lives
- Energy and fuel sources
- The players involved
- Who looks out for consumer interests?
- Looking to the future
Powering our lives
Energy is all around us, no matter where you live in Ontario. In fact, energy lies at the heart of most things we do in life – from using our computers to heating and cooling our homes, offices and schools.
The energy sector is a large and very important part of our economy and a major contributor to job creation, export growth, tax revenues and the country's international competitiveness.
While it powers our economy and way of life, most give little thought to the significance of energy and how it is produced, transmitted and supplied to us around the province. Flick a switch, a room is illuminated. Press “on”, suddenly images flash on our TV’s. Magic? Not quite. A huge, complex system exists to make it all happen. Let’s take a brief look…
Energy and fuel sources
In Ontario, electricity and natural gas are the main types of energy used by the public. Electricity is produced from a variety of sources – water, natural gas, coal, nuclear power, etc. Each province uses a different mix of generation methods, and the costs associated with each method can vary greatly, resulting in different prices across jurisdictions. According to the Ministry of Energy, our province’s current electricity mix is:
- Nuclear power = 51%
- Hydroelectric and other renewables = 23%
- Coal = 19%
- Natural gas = 7%
Natural gas, also called methane, is found in different formations beneath the earth’s surface, including shale, sandstone, coal seams, and deep, saltwater aquifers. It is often found in the same geological formations as oil. While Ontario does have some natural gas reserves, quantities are limited. Our supply is derived mostly from imports from Saskatchewan, Alberta and British Columbia. Natural gas has many applications; the most common is for heating homes and offices. Electricity can also be produced from natural gas and accounts for roughly 7% of Ontario’s generating capacity.
The players involved
Ontario has a dynamic and diverse energy marketplace. A competitive and healthy energy sector gives consumers greater choice, improved access to alternative energy options and more innovative products and services. The sector comprises:
- Regulators: the agencies that govern and oversee the marketplace
- Participants in the electricity sector (generators, distributors, etc.)
- Participants in the natural gas sector (generators, distributors, etc.)
Regulators
Regulation is designed to protect the interests of consumers and ensure the viability, integrity and soundness of the energy marketplace.
- The Government of Ontario, through the Minister of Energy, sets the legal and policy framework – passing legislation and regulations – that govern the energy sector.
- The Ontario Energy Board implements and oversees this framework, ensuring that market participants in the natural gas and electricity sectors comply with their regulatory obligations. In doing so, the OEB balances the interests of consumers with the need to ensure a healthy and efficient energy sector.
Participants in the electricity sector
There are hundreds of players in the electricity sector, which include:
- Generators: Generators produce the electricity that we use. Generation is the first step in the process to provide electricity to consumers. Generators in Ontario include:
- Nuclear plants: There are three nuclear power plants in the province: Pickering Generating Station, Darlington Generating Station and Bruce Power.
- Hydroelectric generators: There are currently about 180 hydroelectric stations in Ontario, the size and power of which vary considerably. The smallest stations produce less than one megawatt of power, while Ontario’s largest, Niagara Falls’ Sir Adam Beck 2 Generating Station, produces over 1,400 megawatts of electricity.
- Coal-fired fuel stations: There are currently four such stations, located in Nanticoke, Lambton, Thunder Bay and Atikokan.
- Renewable energy sources: Ontario also draws its electricity from renewable sources. Renewables refers to energy sources that are renewed by nature including wind, solar and water.
- Transmitters: Once generated, electricity travels across Ontario from generating plants over high-voltage transmission lines to local transformers that then reduce the voltage level, making it suitable for local distribution.
- Delivery utilities (distribution companies): After traveling over the high-voltage transmission lines and through transformers, electricity then travels over low-voltage distribution lines, which are owned by local utilities, to homes and offices.
- Retailers: Electricity is always delivered to your home by your local utility, which owns the distribution lines; however, you can choose how you buy the energy itself. You can choose to do nothing, in which case you will automatically purchase the electricity from your local utility under the Regulated Price Plan. Or you can choose to enter into a contract with an electricity retailer. There are a number of such retailers currently competing to sell power to residential consumers across Ontario.
- The Ontario Power Authority (OPA): The agency responsible for ensuring an adequate, long-term supply of electricity in Ontario. A key objective of the OPA is to forecast electricity demand and the adequacy and reliability of electricity resources for Ontario for the medium and long-term.
- The Independent Electricity System Operator (IESO): The IESO acts as a system controller at the heart of Ontario's power system, connecting all participants - generators that produce electricity, transmitters that send it across the province, retailers that buy and sell it, industries and businesses that use it in large quantities and local utilities that deliver it to people's homes. Every five minutes, the IESO forecasts consumption throughout the province and collects the best offers from generators to provide the required amount of electricity. This allows customers to see prices fluctuate based on supply and demand. As a result, they can shift consumption away from peaks in demand to times when the price is lower. The IESO also co-ordinates emergency preparedness for the province's electricity system and managed the restoration of power following the August 2003 blackout.
Participants in the natural gas sector
These include:
- Producers: The Canadian natural gas industry includes hundreds of firms involved in exploration, production and processing. These firms are also involved in petroleum production. Petroleum and gas always occur together, so it is natural for these firms to be involved in both commodities.
Natural gas is brought to the surface from a reservoir using gas wells regularly spaced to conserve resources. Gathering systems bring it from individual wells to processing plants. Processed natural gas consists almost entirely of methane; however, natural gas in its unprocessed state consists of other components that are removed from the natural gas either at processing facilities at the gas field or at straddle plants located on pipeline systems. After processing, marketable gas is delivered by producers to high pressure steel pipeline systems.
- Pipelines and storage companies: A handful of firms are involved in gas storage and pipeline transmission. Approximately 95 per cent of Canada’s crude oil and natural gas is transported by pipeline. Gas is carried from producing areas in British Columbia, Alberta and Saskatchewan to distribution systems in Ontario and throughout Canada, as well as the United States.
Pipelines move gas on behalf of the owner. Pipeline companies themselves do not own the natural gas in their systems. The seven major natural gas pipeline companies in Canada are: TransCanada Pipelines Ltd. (TCPL), which owns the Alberta System and the Canadian Mainline; Westcoast Energy Inc.; Foothills Pipe Lines Ltd.; TransGas Limited; Union Gas; TransQuébec and Maritimes Pipeline Inc. (TQM); and Maritimes & Northeast Pipeline (MNP).
Large gas storage facilities exist in Alberta and Ontario. Distribution companies commonly own storage facilities, which are used to reduce the costs of gas deliveries during peak winter demand periods. For example, by using storage in Ontario, pipelines that link Alberta and Ontario can flow full year-round.
- Delivery utilities (distribution companies): Utilities deliver (distribute) natural gas to customers.
- Natural Gas Marketers: Finally, several dozen firms are involved in marketing natural gas. Natural gas is always delivered to your home by your local utility, which owns the delivery lines; however, you can choose how you buy the energy itself. You can choose to do nothing, in which case you will automatically purchase the natural gas from your local utility. Or you can choose to enter into a contract with a natural gas marketer. Competitive natural gas marketers offer natural gas and other services to consumers in most areas of Ontario.
Who looks out for consumer interests?
The OEB plays an important role in protecting the interests of consumers, employing a variety of tools and procedures to do so.
For example, the OEB monitors companies to ensure they comply with laws, regulations and other rules governing the sector. We have developed codes of conduct for gas marketers and electricity retailers, and have established a complaint resolution process for consumers who experience a problem with or express a concern about regulated companies. The OEB also provides a broad range of information to energy consumers about electricity and natural gas in Ontario. Read more in The OEB and You: Representing Consumers’ Interests.
Looking to the future
There are few sectors that have undergone as much change in recent times as energy, and it is expected to continue over the next several years.
Our quality of life depends on a safe, clean, reliable and affordable supply of energy. However, we face a number of serious challenges. Ontario’s economy and population have grown considerably over the past two decades, and will continue to expand, resulting in increased demand for power. Yet the province’s ability to generate electricity will not keep pace with rising demand, according to recent forecasts. Many existing power plants are aging and need to refurbished or replaced.
The Government of Ontario is taking steps to better understand and plan now to make sure there is enough energy (electricity in particular) for the years ahead. For example, many energy conservation initiatives are being pursued. The development of new, renewable sources of energy will also help contribute to supply. Currently Ontario draws its energy from variety of sources (coal, natural gas, nuclear power, etc.), so choosing the right mix is essential to meet our future needs, while ensuring the most environmentally friendly options are considered.
Where to get more information
We welcome any questions you may have about Ontario’s energy sector or the role we play in consumer protection and information. Contact our Consumer Relations Centre.
- Also check out our links page to find information from other government organizations and associations.