The Value of Electricity Markets

Like most other commodities, electricity is sold by suppliers to distributors. Distributors then sell the electricity to end-use customers. In Ontario, the process by which suppliers sell to distributors is governed by the wholesale electricity market.

The IESO administers, settles and evolves Ontario’s electricity markets in order to foster competition among suppliers and ensure fair and affordable pricing for end-use customers.

The Function of Markets

Organized electricity markets were created to address increasing electricity prices by fostering competition among suppliers, which in turn drives innovation. Ontario’s wholesale electricity market officially opened in 2002. Markets provide many benefits to customers and the electricity system:

  • Markets improve reliability: By signaling 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.  
Electricity markets icon.

A Day in Ontario's Electricity Markets

The IESO administers Ontario’s electricity markets - 24 hours a day, 7 days a week - ensuring that the province’s energy needs are cost-effectively met.

  • Suppliers bid against each other to provide enough electricity to meet Ontario’s energy needs
  • The IESO reviews and accepts bids, starting with the lowest-cost options, until demand is met
  • The IESO directs the flow of electricity from suppliers to local hydro companies along Ontario’s transmission lines
  • Local hydro companies re-sell and distribute electricity to homes and businesses in their communities

Improving Ontario's Electricity Markets | Market Renewal

Through the Market Renewal Program, the IESO is modernizing Ontario's electricity markets to address inefficiencies and will be a building block to embrace the continued transition to new and diverse resources.