The new entity, called PowerStream Barrie Hydro Distribution, will serve some 310,000 homes and businesses in the cities of Barrie, Markham and Vaughan.
The merger follows nearly two years of discussions between PowerStream and Barrie Hydro as part of their growth strategies.
Merger negotiations began in April 2008.
Hydro One is Ontario's largest electricity distributor, serving about 1.3 million rural and urban customers.