Ontario’s Electricity Supply Industry After the Restructuring: An Economic and Environmental Impact Analysis

Abstract

The Government of Ontario set out to restructure Ontario’s electricity industry in the late 1990s. Through the enactment of the Energy Competition Act, 1998 and the subsequent Electricity Restructuring Act, 2004, Ontario’s electricity sector changed from a traditional “public utility” model (i.e. a state-owned vertically-integrated utility) to a “hybrid model”, which includes both regulated and competitive aspects.

This thesis paper seeks to answer the question: from an economic and environmental perspective, how have Ontario’s electricity consumers been impacted by changes resulting from the restructuring and post-restructuring policies of government? To answer this question, the prices paid for electricity service (commodity, transmission, and distribution) prior to the restructuring are compared to the prices paid for the same service after the restructuring. The analysis reveals that prices are rising more rapidly in the post-restructuring era. The question becomes what changes in the sector are driving the price increases and are consumers benefitting from these changes? This paper evaluates the changes to the sector resulting from the restructuring, and from other post-restructuring government policies, in a qualitative manner to determine whether consumers are receiving any benefit from these changes. The analysis highlights that some changes have impacted customers positively (i.e. shift to more environmentally-friendly energy sources, conservation, distributor amalgamation, etc.) and other changes simply added costs with no real benefits to consumers (i.e. facilitation of a competitive market for electricity supply, retail electricity markets, etc.).