With the current threatened tariff war with the United States, many Canadians are evaluating their purchases and trying to “Buy Canadian” as much as possible. This is something I wholeheartedly support as makes sense for a number of reasons including the environment, the local economy, the quality of items being purchased and the general quality of living. As an aside, and for any readers outside of Niagara, let me also recommend Niagara wines and Niagara vacations.
Because electricity is a provincially managed industry, most people in Ontario will assume that their electricity is Canadian…and they are correct. I think the percentage of the electricity product that comes from Canada is in the high 90’s in percentage terms.
Electricity Commodity
For an average residential customer, the electricity commodity represents about 60% of the monthly bill before HST and before the Ontario rebate. These percentages are all based on a NOTL Hydro residential customer using 750 kwh. The allocation of costs will vary depending on the user (location, customer class, consumption) but should all be roughly the same.
97% of the electricity consumed in Ontario in 2023 was generated in Ontario. The total consumption in Ontario was 137 TWh and the total imports to Ontario was 4 TWh. Most of these imports are from the Provinces of Quebec and Manitoba so the percentage of consumption generated in Canada is even higher than 97%.
Distribution Costs
The next biggest cost on a customer’s bill is distribution costs at about 28% of the total bill. Distribution costs cover the annual costs in providing distribution services plus a return on the investment in the distribution infrastructure.
The annual costs include staff wages and benefits, supplies, software services, interest costs, taxes and profit. Staff wages are 100% Canadian and benefits will be mostly Canadian other than any prescriptions using foreign-sourced medications. Supplies will be mostly Canadian. That was not something we previously looked at in this context except to use local services where feasible. Some of the software services we use are from US companies (billing system, GIS, Microsoft) though even there most of our costs are for ongoing support which is local. Our SCADA system and payroll software is Canadian. Our interest costs, taxes and profits are 100% Canadian. I would estimate over 95% of our annual costs are Canadian.
Identifying the source of most of our distribution infrastructure is more challenging. The infrastructure is made up of poles, wire, transformers, meters, conduit and various devices. Poles are 100% Canadian. No surprise there. Our transformers are also mostly Canadian. The large transformers in our stations were all made in Canada though the materials came from around the world. The regular transformers on the grid have also been exclusively purchased from a Canadian company for the past number of years. Our meters all come from the US. With wire and other devices it is hard to tell. We purchase through hardware distributors and they would have a mix of US and Canadian suppliers. We do know that the newer smart grid devices such as switches and reclosures tend to be made in the US. All the labour installing this hardware is 100% Canadian. To be conservative I would estimate that our distribution infrastructure is over 75% Canadian.
Annual operating costs are over half of the costs that go into rates so in total I would estimate that distribution costs are around 90% Canadian.
Transmission Costs
Transmission costs make up about 8% of the bill. Transmission services in Ontario are almost entirely provided by Hydro One; an Ontario based company. I do not have enough insight into their operations to provide a detailed breakdown, but my guess is that they are not dissimilar from NOTL Hydro in the make-up of their costs so would be around 90% Canadian.
Regulatory Costs
These charges go primarily to the Independent Electricity System Operator (IESO) to manage the electricity grid though there is also a charge to fund subsidies for electricity distribution to some remote users. As a result, these costs are almost 100% Canadian.
Conclusion
Electricity users in Ontario and all of Canada can comfortably assume that their electricity is almost 100% Made in Canada. Like our users, NOTL Hydro is also evaluating its purchases to try ensure that they are as Canadian as possible.