THE EARLY DEVELOPMENT OF HYDROELECTRICITY IN ONTARIO
Kenneth C. Dewar
Technological change has seldom aroused as much excitement among politicians or as many expectations among businessmen as did the introduction of hydroelectricity to Ontario at the end of the nineteenth century. The new source of light and power had an enormous impact on the economy and politics of the province comparable only to the coming of the railway fifty years earlier. Moreover, just as the steam locomotive had inspired countless rhapsodic hymns to growth and industry, so too did "hydro" produce its own mythos of industrial progress, of unlimited development free from the belching smoke-stack which had marked the previous era of expansion.
It is the political history of hydro that has held the greatest fascination for historians. This is not surprising since, for the better part of two decades (and intermittently up to now) hydro was a central issue in Ontario politics. Who should own it? If a government agency, how should that agency be administered?
"The Hydro"
In 1906, in response to the demands of a well-organized movement of businessmen, the provincial government created the HydroElectric Power Commission of Ontario. "The Hydro," as it came to be called, was empowered to build electrical transmission lines from waterpower sites to municipalities anywhere in the province, though its first task was understood to be the linking of Niagara Falls with towns and cities of southern Ontario. It also was authorized to help municipalities establish local electrical distribution facilities. It might, in addition, buy or expropriate privately owned companies but only with approval by the provincial Cabinet. Some private companies and financial interests, particularly in Toronto and London, England, strongly resisted the government's action and continued to do so after the Commission began operating in 1910. Various disputes surrounded "the Hydro" almost continuously for another dozen years.
State Ownership
More than for its specific role in Ontario politics, historians have been chiefly interested in "the Hydro" as an example of state ownership in Canada. Together with the telephone systems of the prairie provinces, the Canadian National Railways and the Canadian Broadcasting Corporation, "the Hydro" has long been thought to illustrate a peculiar Canadian propensity towards government involvement in the economy. Special attention should be paid to the word "peculiar," for until quite recently it has been assumed that in the evolution of liberal capitalist societies, the normal practice of governments has been to avoid intervening in the operations of business. It was assumed that until the 1930s and the Second World War capitalist development was accompanied and even caused by laissez-faire policy on the part of governments. Thus, state economic activity in Canada has been viewed as an aberration, and referred to as a tendency toward state socialism. Historians and other writers have for this reason devoted considerable attention to this phenomenon. Their explanations have usually rested upon one or more supposed peculiarities in Canada's national character or situation: its enormous size, its lack of capital, its problem of independent survival on the North American continent, its toryism. Indeed, a high degree of state economic activity is now widely believed to be one component of the elusive Canadian identity.
That is, however, a distorted and misleading view of the state's role in Canadian development. Two kinds of evidence lead to this conclusion. One is that a growing number of writers are disputing the identification of laissez-faire and capitalism. Research conducted over the past thirty years suggests that in western Europe, the United States and Great Britain, capitalist development throughout the nineteenth century was marked by an active partnership of business and government. Laissez-faire existed, certainly, but as a propaganda weapon to be used in debate by any group whose purpose it was thought to serve. Nowhere was it a consistently applied policy. This is important for the study of Canada because our conclusions about Canadian state activity have been moulded to a large extent by the way we have formed our questions. If our experience of state ownership has not been unique then perhaps it should be explained, not in terms of some characteristic confined to our society, but by much more specific and mundane factors pertaining to the particular time and situation of individual examples of state action.
The Hydro and State Ownership
The usefulness of this type of approach is confirmed by the second kind of evidence. In the case of "the Hydro," state ownership arose from specific needs of Ontario manufacturers and merchants and the interaction of their needs with technological changes and economic forces over which they had little control. Ontario businessmen needed a low cost source of fuel. They were prepared to use their influence to obtain whatever government action was necessary to acquire this fuel. They preferred the use of regulations forcing the capitalist owners of hydroelectric facilities to broaden their service and reduce their rates, but supported, if necessary, outright state ownership. Arguments for state action frequently were couched in nationalist and populist terms. "The people's power," however, was a slogan tied to the self-interest of Ontario merchants and manufacturers. No contradiction was seen between government ownership of electrical utilities and private ownership throughout most of the rest of the economy. On the contrary, the one sustained the other. Hydro was an example, not of state socialism but of state capitalism.
Electricity and Technological Change
During the 1890s, when the possibilities of hydro were recognized, electricity was already being used to light the streets of many Ontario towns and cities, to light stores and factories and, for middle and upper class people who could afford it, to replace gas lights in the home. As well, it was used increasingly to run street cars in and between municipalities. Indeed, it very quickly displaced the horse as a power source for urban and interurban public transportation systems. For twenty years, until it competed with gasoline-run vehicles, electricity provided a cheap and efficient means of moving people and goods. In addition to lighting and transportation, electricity powered a small but growing number of manufacturing concerns: sewing machines, printing presses and elevators. As yet the electric motor could not compete with the steam engine as a source of "motive power" in most industries.
It should be said of course that electricity, properly defined, is not a source of power at all. It is a means of transmitting power from a "prime mover" to a point where the power can be consumed. For example, the thermal energy of a boiler furnace fed by coal, oil, gas or some other combustible material can be converted to electrical energy, transmitted by wire to a consumer and converted again into mechanical energy by an electrical motor. Similarly, electricity can transmit the kinetic energy of falling water. The term "electric power" is meant simply to distinguish electrical energy from the direct employment of steam or hydraulic power. During the 1890s, almost all of Ontario's industrial power was steam, and most of its electricity, whether used for lighting, traction or power, was steam-generated.
In the last decade of the nineteenth century three technological changes progressed from the stage of scientific invention and innovation to that of successful commercial application and, thus, made hydroelectricity practicable as a substitute for steam power. Firstly, turbines were developed, particularly in Switzerland, Italy and Germany, which could efficiently take power from a large "head" of falling water. Secondly, alternating current was introduced as a means of transmitting power over a distance of many miles. Direct current, on which early electrical development had been based, could be transmitted efficiently only for short distances. The successful use of AC (alternating current) meant that a power source as large as Niagara Falls, was now accessible to central and southern Ontario. Thirdly, equipment was developed which enabled AC to be used in electric motors.
Developing the Sources of Niagara
The first significant application of the new technology on the North American continent was made on the American side of Niagara Falls. In 1895 a company began generating electricity there and transmitting it some twenty miles to Buffalo, New York. Contrary to expectations, industrial development first came directly to Niagara rather than to Buffalo, and several years were to pass before the full potential of the venture was realized. Nevertheless, the breakthrough was significant and attracted wide attention. Gradually transmission problems were reduced and manufacturers began converting machinery to electric power. In Ontario a group of Hamilton entrepreneurs organized a company in 1896 and two years later their plant began transmitting power to the city from a point on the Niagara escarpment thirty-five miles away. With two exceptions this was the longest transmission line then operating anywhere in the world. Hamilton proclaimed itself "The Electrical City" and used its supply of relatively cheap power to help induce manufacturers to move their factories to the city or set up branch plants. Electricity now assumed a dual importance for Ontario industry; hydro power was cheaper than steam power and steam power was derived from imported American coal. Successful tapping of Ontario's abundant water power would greatly reduce the province's dependence on foreign fuel supplies.
Hydroelectricity and Ontario Politics
Even prior to the existence of Ontario Hydro the political importance of the new technology was substantial. The urban reform movement had been gathering strength since the late 1880s. Essentially the response of businessmen and professionals to the problems created by unregulated urban growth, the movement set out to improve the quality and reduce the cost of municipal services and to change the structure of municipal government mainly by concentrating political power in the hands of a "better class of men" - businessmen and professionals. Reformers believed that the best way of accomplishing the first aim was for local governments to take over the services and administer them in a businesslike and efficient manner through appointed commissions. The movement achieved a large measure of success. Beginning usually with the water supply, and extending through sewage disposal, road building, etc., municipal services came increasingly under state ownership in the period before World War I. Sometimes a service was inaugurated by the municipality; frequently, existing services under private companies were taken over. Municipal ownership of the electrical utility was especially desirable since the reformers hoped that cheaper, more efficient electricity could be used to reduce the cost of other services, particularly transit but also the waterworks, since electric power could be used for pumping.
There was already, then, a widespread hostility to privately owned electrical utilities and an increasing sentiment in favour of municipal ownership. As the nineteenth century drew to a close the practicability of employing hydro to drive industrial machinery modified the role of electricity. Where previously the politically active manufacturers and merchants of southern Ontario had been susceptible in their political capacities to the blandishments of cheap electricity for street lighting and other services, many now were susceptible in their business capacities as well. The potential constituency for the politics of state ownership had broadened.
By 1903, in response to two developments, the potential constituency became an actual political force. Early in that year the provincial government granted privileges to a third company to generate and distribute electricity from a plant at Niagara Falls. The first two companies had been American. One had received its franchise as early as 1892 but had delayed beginning construction for a decade, due to technological problems and also to maintain the monopoly of Niagara Falls power production enjoyed by its parent on the New York side of the river. The second company also began construction in 1902. The third company was Canadian and its promoters were three Toronto capitalists, William Mackenzie, Henry Mill Pellatt and Frederic Nicholls. All three were leading figures in the privately owned lighting and traction utilities in Toronto, and Nicholls was the driving force behind Canadian General Electric Company which at that time virtually monopolized the Canadian manufacture of high-power generation and transmission equipment. The granting of the new franchise prompted fears that Niagara power would be controlled by monopolistic capitalists and would be priced accordingly. In the manufacturing towns and cities of southern Ontario an additional fear emerged that Niagara power would benefit only Toronto and the United States.
At the same time conflict between capital and labour in the anthracite coalfields of the U.S. interrupted mining and caused shortages of coal in Ontario in the fall and winter of 1902-1903. Coal prices rocketed. Although the term was not used at the time, there was, in effect, an "energy crisis." One consequence was a heightened awareness of the capacity of Niagara Falls to produce hydroelectricity as an alternative and stable supply of cheap power. The movement to obtain government control or ownership of hydroelectric facilities attracted growing support.
The Liberal government which had held power for thirty years in Ontario was closely connected with private power interests. It responded somewhat feebly to the demand for action by authorizing a commission of inquiry and by empowering municipalities to take action on their own, individually or collectively. The government refused, however, to get itself into the power business. The Conservative opposition responded somewhat more positively and over the next two years, Adam Beck, a cigar box manufacturer and the party's member for London, assumed the leadership of the public ownership movement. When the Conservatives defeated the Liberals in 1905 it was mainly for reasons only indirectly connected with the hydro issue, but they were expected to be more sympathetic to public ownership than their opponents.
The new government proceeded quickly to establish its own commission of inquiry and in 1906 passed legislation creating the Hydro-Electric Power Commission. During the next three years further legislation was passed, consolidating and supporting the first act. Ownership of transmission facilities was thought sufficient to force lower prices from the production companies at Niagara and to provide a more even distribution to the municipalities of southern Ontario. The Toronto syndicate of Mackenzie, Pellatt and Nicholls, opposed the action and exerted all possible pressure on the government. The financial press in Canada and in England, where much of the syndicate's capital had been obtained, bitterly criticized the creation of "the Hydro" and especially the threat to expropriate private companies. The syndicate attempted to persuade the federal government to disallow the province's legislation. Support for "the Hydro," however, was simply too widespread. On October 11,1910, power delivered by state-owned transmission lines was officially turned on in Berlin.
The Berlin ceremonies inaugurated a period of expansion which surpassed the expectations of even the most avid supporters of public ownership. Not only did Hydro's transmission lines serve a rapidly growing number of consumers, but in 1913, the Commission opened its first hydroelectric generating station and by the end of the First World War it had purchased one of the large plants at Niagara Falls and begun construction of an even larger one at Queenston. It bought out the various companies of the Toronto syndicate in 1920. Within a decade "the Hydro" had consolidated its position as a transmitting agency and had become, in addition, a highly centralized producer of hydroelectric power.
