Glossary of Terms
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- Bill 35
- Distribution System
- Hourly Spot Price
- Independent Electricity System Operator (IESO)
- Kilowatt Hour (kWh)
- LDC (Local Distribution Company)
- Megawatt (MW)
- Ontario Energy Board (OEB)
- Regulated Price Plan (RPP)
- Smart Meters
- Spot Market
- Standard Supply Service
- Time-of-Use Pricing (TOU)
- Transmission System
- Wholesale Market
Energy Competition Act, 1998
This provincial statute enacted the Electricity Act, 1998 and the Ontario Energy Board Act, 1998. These statutes set the legal framework for restructuring Ontario Hydro into successor organizations, commercialized the distribution industry, and opened the competitive wholesale market. The electricity sector involves an extensive framework of legislation, regulations, codes, and oversight mechanisms.
The electricity delivery system that connects most individual customers to the provincial grid’s transmission system.
A form of energy associated with the movement of electrons and protons. Electricity is not something we are able to store – it must be used as it is produced. Electricity markets are consequently much more complex, and are inherently subject to more volatility, than markets for storable commodities such as natural gas, oil or grain.
Hourly Spot Price:
Wholesale sellers (generators) submit offers and wholesale buyers (loads) submit bids for electricity in different quantities and prices for each hour. The IESO calculates the spot price by balancing the supply of electricity with demand. As demand increases, or supply decreases, buyers submit higher bids, which raise the spot price. As demand falls, or supply increases, only less expensive offers from sellers are accepted, and prices drop. Most residential customers do not purchase electricity according to the Hourly Spot Price, which is highly volatile. Rather, these customers purchases electricity according to the Regulated Price Plan or through a contract with a Retailer.
Independent Electricity System Operator (IESO)
Formerly the Independent Market Operator (IMO), the IESO is responsible for establishing, monitoring and enforcing reliability standards in the province. All the companies that make up the power system in Ontario must meet the IESO’s standards. It is regulated by the Ontario Energy Board. For more information, visit the IESO website: www.ieso.ca.
Kilowatt Hour (kWh):
1kWh is equal to 1,000 watt hours. 1,000 watt hours would be the energy consumed by 10 light bulbs with 100 watt ratings in the span of 1 hour.
LDC (Local Distribution Company):
The term used to describe the regulated, licensed distributors such as Essex Powerlines Corporation
One thousand kilowatts.
Ontario Energy Board (OEB)
The regulator of Ontario’s natural gas and electricity industries. The OEB’s mandate and authority come from provincial legislation and the Board reports to the Ontario legislature through the Minister of Energy. For more information, visit the OEB website: www.oeb.gov.on.ca.
Regulated Price Plan (RPP)
Spot market prices for the electricity commodity fluctuate every hour based on supply and demand. To smooth this volatility for customers, the Ontario Energy Board pre-sets rates under the RPP. These rates are set once every 6 months and reflect what the OEB anticipates average commodity rates will be in the coming rate period. The RPP rates are on a dollars per kWh basis. The RPP has a threshold, meaning customers pay more per kWh after using a pre-set amount of electricity. The threshold is reset once every 6 months when rates are reset. This is the default purchasing plan for customers.
A company that sells electricity or arranges transactions between or on behalf of electricity generators and customers. This is a financial transaction only, as the physical delivery of electricity is still carried out by distributors.
These technologically advanced electricity meters not only track the amount of electricity used, but also the time at which it was used. Therefore, Smart Meters can be used to administer Time-of-Use pricing.
The real-time market in which the Independent Electricity System Operator (www.ieso.ca) matches supply and demand and sets the spot price for the electricity sold in that hour. The difference between the electricity spot market and that for other commodities is that with electricity, the commodity is also consumed right away, as it cannot be stored.
Standard Supply Service:
This is the default electricity supply and billing relationship between distributors and customers that exists when customers do not choose to contract with electricity retailers.
Time-of-Use Pricing (TOU)
TOU charges customers different rates at different times of the day. During periods of the day when more customers in the province are consuming electricity, customers are charged more per kWh than periods when there is less consumption. Normally TOU is divided into 3 segments: off-peak (little provincial demand), mid-peak (moderate provincial demand), on-peak (high provincial demand). Other segments may be created from time-to-time by the Ontario Energy Board.
The high-voltage network that carries electricity from generators to distribution systems.
Refers to the separation of the details of all charges that go into a customer’s electricity bill – delivery charge, commodity of electricity itself, and regulatory charges. In Ontario’s competitive market, each piece is calculated separately.
The market in which electricity is sold to retail companies or provided to distributors, who pass through the price to their customers.