Electric Utilities

Electric utilities are private or government organizations involved in the production, transmission, distribution, marketing and sale to consumers of ELECTRIC POWER. Canadian electric UTILITIES account for approximately 92% of the total production of electrical energy in Canada; the remaining 8% is produced by industrial establishments for their own use, chiefly in the MINING, metal-processing and PULP AND PAPER industries.

The electrical-utility industry started in the 1880s as a multitude of privately owned enterprises which supplied electrical ENERGY in specific communities or regions. Many also provided other services such as gas distribution and street railways. As the use of electricity increased, many of the original companies were absorbed by larger, investor-owned corporations. In most instances, nonelectrical energy activities were split off; eg, STREET RAILWAYS were taken over by municipalities. Early in this century, PUBLIC OWNERSHIP of the electrical-utility business emerged, beginning with municipal ownership of electrical generation or distribution. A significant development was the creation of a provincially owned utility, now ONTARIO HYDRO, in 1906.

Trend Towards Provincial Ownership

Increasing demand for adequate supply of electrical energy at roughly uniform rates created a trend towards provincial ownership of the industry. Provincial government takeover of municipally and investor-owned electric utilities accelerated after WWII. Provincial ownership was intended to provide electricity at lower cost to consumers as a result of such factors as provincial guarantee of capital debt, co-ordinated planning and absence of profit-taking and income-tax burden. The federal role regarding electricity is restricted to nuclear energy and international and interprovincial trade.

By the 1990s, Canada's electrical-utility industry was characterized by a mix of investor, municipal and provincial ownership. Except in Alberta and PEI, provincial bodies play the dominant role in generating capacity, transmission network and assets. These bodies are BC Hydro and Power Authority (BC HYDRO); Saskatchewan Power Corporation (SPC); the Manitoba Hydro-Electric Board (Manitoba Hydro); the Hydro-Electric Power Commission of Ontario (Ontario Hydro); HYDRO-QUÉBEC; the New Brunswick Electric Power Commission (NB Power); the Nova Scotia Power Corp (NS Power); and Newfoundland and Labrador Hydro. There are 16 major electric utilities in Canada. Among Canadian electric utilities, 8 are provincially owned, 7 are investor-owned, 2 are municipally owned, and 2 are territorial CROWN CORPORATIONS. In addition there are four privately-owned utilities in Ontario.

In the northern territories, the Northern Canada Power Commission (NCPC), a federal crown corporation, has been the principal electrical utility in the NWT, the Yukon and Nunavut. An investor-owned utility operates several diesel-generating stations supplying isolated communities, and purchases power from the NCPC for distribution in Whitehorse and several smaller communities. In 1987 the NCPC assets in the YT were transferred from federal to YT control and ownership; concurrently, the government of YT established the Yukon Energy Corp to hold and manage the new territorial enterprise. In the NWT the NCPC is the principal supply authority pending negotiations leading to devolution of the federal interest in the NCPC to the government of the NWT. In addition, an investor-owned utility supplies 3 communities that are not connected to the the NCPC system, and a second investor-owned utility distributes electrical power in the city of Yellowknife.

Investor-owned utilities dominate in Alberta and PEI, and play a minor but significant role in BC, Ontario and Newfoundland. Municipal ownership is a minor element in BC, Québec and PEI but is very significant in Alberta, Manitoba and Ontario.

The 5 investor-owned utilities accounted for 7% of all Canadian electric utility capacity and produced about 9.5% of total electricity. Municipally owned utilities accounted for 1.6% of capacity ownership and produced 1.4% of total generated electricity. The 2 territorial crown corporations accounted for 0.3% and 0.2% of capacity and generation respectively.

Smaller Utilities

As well as the major electric utilities and industrial establishments, there are about 364 smaller utilities across Canada, of which 87% are located in Ontario. Most of these small utilities are owned by municipalities. They do not own generating capacity; instead, they usually purchase power from the major utility in their province. Several small investor-owned utilities, however, have their own generating capacity. In 1994, small utilities accounted for 1.3% of total Canadian capacity and produced 1.4% of electrical energy.

During the past few years, some independent power producers have also been established across Canada, dedicating their entire electricity generation for sales to major electric utilities. These IPPs normally do not have their own service areas. In 1994, IPPs owned about 0.9% of Canada's total installed capacity and produced 1.3% of total generated electricity.

While the electrical-utility industry is structured on a provincial basis, electric-power transmission interconnections for interchange of supply have been established between all adjacent provinces, except that construction of a Saskatchewan/Alberta interconnection is scheduled for completion in 1989. Interconnections with US utilities have been developed by NB Power, Hydro-Québec, Ontario Hydro, Manitoba Hydro, SPC and BC Hydro. These cross-border connections are primarily for export of electricity from Canada, but they also permit some imports when needed. Electrical-energy exports and export facilities are licensed by the NATIONAL ENERGY BOARD.

An important component of the electrical-utility industry is the Canadian Electrical Association (established 1891). All major investor-owned and provincially owned utilities, and some municipal utilities, are corporate members of the association, and many manufacturers of electrical equipment have nonvoting membership status. The CEA co-ordinates the exchange of general and technical information, and provides a liaison with the provincial and federal governments. It also sponsors and co-ordinates research which supplements activities of the 4 utilities that have research divisions: Hydro-Québec, Ontario Hydro, SPC and BC Hydro.

In Canada, electric utilities price electricity at the average cost of production, which is generally lower than the marginal cost of production. Although marginal-cost pricing of electricity has the advantage of achieving economic efficiency (ie, closing the cost-price gap), this pricing method has not been adopted by the provincial electric utilities because of the complexities of marginal costing and because average costing has provided low-cost electricity and enhanced opportunities for regional economic development.