Electricity Pricing Explained

Ontario is growing quickly, and so is its demand for electricity.  New energy-intensive industries like data centres are calling our province home, while more and more Ontarians are increasing their reliance on electricity at home, on the road and in their businesses.

The IESO is here to ensure reliable, affordable, sustainable electricity as Ontario grows. That means seeing to it that our province has enough available electricity and makes cost-effective use of that supply every day.

The IESO accomplishes this by combining competitive procurements with a wholesale electricity market. Our strategic procurements drive the development of new supply, to ensure Ontario has the diversity and availability of electricity it needs. Meanwhile, our wholesale market works to efficiently manage that supply within the complexity of the grid moment-to-moment.

This balanced approach keeps prices stable and helps avoid shortages that face other jurisdictions, while harnessing the power of competition to keep costs as low as possible. It will provide the certainty customers need as they make the choice to electrify. Maintaining this balance will be critical as Ontario’s energy needs grow.

To meet growth in demand, our electricity system is expected to double in size and become much more complex. Until now, there have been just a few hundred energy suppliers such as generators, energy traders and large industrial customers participating in the market. In the future, we’ll have thousands of market participants of different types and sizes, with more diverse sources of supply. 

A New Era for Ontario's Electricity Market: Market Renewal Explained

The Function of Markets

Ontario’s wholesale electricity market officially opened in 2002 and was substantially renewed in 2025. Markets provide many benefits to customers and the electricity system:

• Markets improve reliability: By signalling the level of demand for electricity, markets provide suppliers with a financial incentive to produce more electricity when demand is high and less when demand is low.
• Markets drive economic growth: By offering opportunities for suppliers to earn profits, markets drive job creation and economic growth. Markets also make the pricing of electricity more transparent, which can persuade companies and businesses to move their offices and production facilities to Ontario.
• Markets improve grid operability: Since electricity suppliers are only paid when they produce electricity, markets encourage suppliers to operate within their limits. If suppliers are unable to supply electricity at any given time, they lose revenue.
• Markets level the playing field: By giving new market entrants a baseline for their decision-making.  

Renewing Ontario’s Electricity Markets

To support the grid of the future, the wholesale market must evolve. The renewed market lays the foundation for a more diverse, dynamic energy future. The market will be:

• Competitive, as it provides a level playing field for many more, and more diverse, market participants.
• Efficient, as it navigates increasing complexity to coordinate the flow of electricity, at the lowest cost to maintain reliability. That includes being optimized for operating realities across the province and over the course of the day.
• Accessible, as it provides clear information that market participants and observers can use to decide how and when to use or produce energy. For instance, the new market will include day-ahead and locational pricing, to help stakeholders at all levels make better, more confident decisions.

Market Evolution

Going forward, the market will continuously evolve to support the rapid expansion of Ontario’s electricity system: making best use of new investments, welcoming new participants, and providing sector-wide visibility as emerging resources such as battery storage, demand-side participation, and distributed energy resources (DER) are added to the grid.

Throughout the growth and transformation of Ontario’s electricity system, the IESO is committed to working closely with stakeholders, including new and existing participants, consumers, and government. Together, we’ll help Ontario grow, while ensuring energy remains affordable, reliable, and sustainable every step of the way.