Ontario Hydro

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Ontario Hydro

700 University Ave.
Toronto, Ontario M5G 1X6
Canada
(416) 592-3345
Toll-free: (800) 263-9000

State-Owned Company
Incorporated: 1974
Employees: 28,000
Sales: C$7.14 billion (US$5.96 billion)

Ontario Hydro is unique in that it is a government-owned electric utility corporation, regulated by the Ontario Energy Board, that is run as a business. Employing 28,000 full-time workers, and with assets of over C$43 billion, it is one of the largest utility companies in North America. The company produces electricity and provides electrical service to the people of Ontario—the richest and most populous Canadian province—including the nation’s capital, Ottawa.

While present day Ontario Hydro produces most of its electricity from nuclear and fossil-fueled generators, until the 1950s most of Ontario’s electricity was derived from water or “hydro” power. Though Ontario is blessed with an abundance of water, much of it does not provide the pressure necessary to generate power because the province’s terrain is relatively level and the water does not “fall.” Thus electricity was initially provided to larger cities by small, privately-owned thermal-electric plants run by fossil fuels.

However, the powerful Niagara Falls was located in Ontario, on the Canada-United States border, an area populated by the majority of the province’s citizens in the late nineteenth century. In 1895 the first major generating station was built, harnessing the power of the Niagara Falls— for many years the province’s most vital source of electricity. Still, only local areas were able to take advantage of this, provided with power by a number of private companies given water-power leases on the falls.

At the turn of the century, a group of prominent Ontario citizens began to advocate public ownership of the hydroelectric industry. Foremost among the proponents was Adam Beck, the mayor of London, Ontario. A vociferous, energetic supporter of public ownership of electric power, he threw the entire weight of his office’s prestige and his powerful connections behind lobbying the Ontario legislature in favor of the idea, arguing the thinly-populated province would benefit from having a one-company monopoly rather than rival private competitors. Before approval could be given, however, legal battles had to be fought with the United States to regain control of parcels of the Canadian Niagara Falls that had been purchased by American companies. Also, the public had to be won over to the idea of a government monopoly of electric power.

Finally in 1906 the Ontario legislature passed a statute creating the Hydro Electric Power Commission of Ontario—direct forerunner of the present company—to be headed by Sir Adam Beck, as he later became. The commission was given a mandate to provide all citizens with electricity at the lowest possible cost. This “socialist” measure, although viewed with alarm in the United States and Great Britain, achieved its desired results.

Initially Hydro purchased electric power from private entrepreneurs for distribution to those municipalities that had contracts with the commission. However, the utility gradually began to purchase and, much later, to build its own hydroelectric generators, in addition to transmission systems.

The First World War enormously expanded the need for electricity. The demand for electric power in Ontario tripled during the war, continuing at the higher rate even after the war’s end. In 1914 Hydro purchased its first generating station, and later the same year construction was completed on the first generating station to be built by the commission. Thus began an aggressive purchasing and building campaign, necessary to meet the increased demand, due in part to the soaring popularity of such electric appliances as irons, vacuum cleaners, and washing machines.

By 1922 Hydro was the largest, most powerful utility in the world, with a demand for electricity of 496,000 kilowatts, up from 4,000 kilowatts just 12 years before. To help meet the ever-growing demand, Hydro completed construction in 1922 of its first major power station, Queenston-Chippawa—renamed later the Sir Adam Beck-Niagara Generating Station No. 1. It had taken two thousand men to build, and was the largest power generator in the world.

In the 1930s the commission took over administration of a series of small northern systems—later to be known as the Northern Ontario Properties—that primarily provided service to the paper and mining industries in that region. Three systems, serving the southern, more populated area of Ontario, were consolidated into the Southern Ontario System in 1944. These two systems were eventually combined into one in 1962, although two others, divided at Sault Ste. Marie into the East System and West System, remained separate. In 1970 all of them were finally merged into one province-wide integrated system, with enough capacity to supply electricity to the United States at a handsome profit.

The years after World War II saw the biggest expansion of utility companies, and the Hydro Electric Power Commission of Ontario was no exception. Immediately after the war, Hydro began construction of eight additional hydroelectric stations. In the late 1950s—with demand for electricity still unsatisfied—the commission decided to harness the St. Lawrence River, Ontario’s last major undeveloped hydraulic site. The St. Lawrence project was undertaken jointly with the State of New York, and when completed, added an extra 1 million kilowatts to the Hydro system, which, at the time, included 65 hydro stations and two fossil-fueled plants.

With the completion of the St. Lawrence project in 1958, Ontario had only minor waterways available for hydroelectric development. While thermal-electric plants are efficient generators during “peak” times of usage, these did not provide a viable alternative to meeting the spiraling demand for electricity, due to the expense of importing the fossil fuels necessary to run the plants. Nuclear power seemed to be the logical answer; fortunately, Ontario was richly endowed with the uranium that was used in the nuclear reactors. As early as 1951 Hydro had begun to experiment with nuclear power for commercial use, completing its first experimental nuclear power plant in 1962, followed in 1967 by a much larger one. While nuclear power is clean and efficient, it is also costly. Hydro engineers began experimenting successfully with increasing the size of nuclear power generators, developing the CANDU, or Canadian type reactor, that all nuclear power stations in Canada now use. CANDU reactors were successfully installed in the Pickering A generating station, Canada’s first major nuclear power facility, completed in 1971. By 1993 two-thirds of Ontario’s electric needs will be produced via nuclear power.

Diminishing natural resources, soaring costs, growing environmental consciousness, and the rise of aboriginal movements in Canada signaled that it was time for the Hydro Electric Power Commission to evaluate its direction for the future. An Ontario legislative task force was established in 1971 to examine these changes and to determine how Hydro could best meet them. The result was a major reorganization that enabled the company to better respond to the social and economic complexities of the late twentieth century. Hydro ceased being a commission and became incorporated as a “crown corporation” in 1974, adopting the name Ontario Hydro. While still a government monopoly, the company became financially independent and was expected to turn a profit. The new Hydro was managed by a 17-member board of directors, 16 of which, including the chair, were appointed by the provincial lieutenant governor, while the president was appointed by the board itself. Although the newly reorganized company began to focus on social and environmental issues in addition to producing electricity, Ontario Hydro’s mandate remained as it was in 1906, although expanded: not only electricity, but also electrical services including inspection and repair of electrical wiring and equipment, would be provided to Ontario citizens.

Throughout the 1970s and 1980s Ontario Hydro faced the public’s growing concern about the world’s shortage of fossil fuels and mounting damage to the environment. In an effort to deal with these problems, as well as keep costs down and moderate demand, conservation became an important company initiative. By late 1991 Ontario Hydro had invested nearly C$179 million in energy conservation, which produced a reduction in demand, in that year, of 250 megawatts and resulted in a savings to customers of C$28 million. Other measures undertaken to aid the environment included company-wide recycling and the installation of scrubbers in many of the hydroelectric plants. The latter is a step toward reducing the amount of acid rain—sulfur dioxide and nitrogen oxide emissions—in the atmosphere.

In 1991 Ontario Hydro created a commission on aboriginal and northern affairs to address the concerns of the aboriginal communities. One important concern was the infringement on their hunting and fishing rights that could result from Ontario Hydro’s plan to build several small hydroelectric plants in the area. The plan was halted, pending further study of the issue.

In response to the recession of the early 1990s, although the company continued to show a modest profit, Ontario Hydro found it necessary to reduce its workforce. The company was praised, however, for its humane “downsizing,” in which employees whose jobs were targeted for elimination were given the option of assessing their abilities and determining how and where they could best fit into other areas of the company. Those employees who left the company received generous severance packages. Salary freezes were approved for senior management for the foreseeable future. To further offset increased costs and the effects of the recession, the Ontario Energy Board gave its approval for a sizable rate hike of 11.8 percent.

In addition to emerging as a leader in energy conservation, social consciousness, and employment policies, Ontario Hydro continues to generate profits and increase its exports, signing 76 contracts to provide its services abroad in 1991.