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Energy Regulatory Update (Q4, 2025)

Happy New Year and welcome to the latest edition of the Shepherd Rubenstein Energy Regulatory Update, our quarterly overview of key developments in the Ontario energy sector. This update highlights the most significant regulatory and policy activity between October and December 2025.

If you have not already done so, we invite you to read our special 2025 Year in Review, which examines last year’s important themes and regulatory developments.

Ontario Energy Board

The OEB issued a number of notable decisions over the last few months, including:

The OEB announced that it intends to commence a generic proceeding to review the OEB’s Model Franchise Agreement in 2026.

As part of its work in response to the Integrated Energy Plan (IEP) Directive, the OEB:

Separately, to support promoting DERs to meet system needs, the OEB also:

Final amendments to the Distribution System Code were issued to further streamline the DER connection process by increasing the micro-embedded generation capacity limit, revising insurance requirements, removing the capacity allocation exemption, aligning connection impact assessment timelines, and broadening technical standard requirements.

As a follow-up to the work of the Reliability and Power Quality Review (RPQR) initiative, the OEB announced enhancements to the regulatory framework for transmission reliability and power quality, including plans to propose amendments to the Transmission System Code, and new reliability and power quality reporting and record-keeping requirements (RRRs) to improve transparency and regional benchmarking. It also released updated reliability performance improvement targets (SAIDI/SAIFI) and peer group assignments for electricity distributors based on 2020-2024 performance data, to be applied in rebasing applications for 2027 rates and beyond.

Work was further advanced in two other major consultations. The OEB held a stakeholder meeting to advance the development of a DSO roadmap as part of its DSO Capabilities consultation. As part of its IRP Framework Review, the OEB issued a Staff discussion paper for comment and held a stakeholder meeting.

The OEB announced the outcome of its review of the Working Capital Allowance for electricity distributors, maintaining the current 7.5% default value.

The final Vulnerability Assessment and System Hardening (VASH) Report and toolkit were released.

The OEB amended the Rules of Practice and Procedure to address the use of artificial intelligence in filings by parties in adjudicative proceedings. It also issued an implementation update on certain items in its 10-Point Action Plan, part of its September 2024 Report Back to the Minister of Energy and Mines on Intervenors and Regulatory Efficiency, including a new Small Distributor Process.

Updated filing requirements were issued for electricity transmission rate applications, including a  separate guidance document for transmitters with declining rate base, as well as for electricity distribution cost of service rate applications.

A generic DVA was established to allow electricity distributors to track Capacity Allocation Model (CAM) related capital costs, customer capital contributions, and financing charges associated with distribution system expansions for qualifying development areas.

The OEB set the RPP prices as of November 1st.

Both the CEO and Chief Commissioner issued their mid-year updates. The CEO also issued a letter outlining the initial steps the OEB was taking in response to amendments to the Ontario Energy Board Act resulting from the passage of Bill 40.

Assurances of Voluntary Compliance (AVC) were accepted from E.L.K. Energy for incorrectly applying the Ontario Electricity Rebate, and Vale Canada Limited for operating without a generating licence.

The OEB received a new Letter of Direction from the Minister of Energy and Mines.

Independent Electricity System Operator

In late November, the IESO presented the demand forecast to be included in its 2026 Annual Planning Outlook (APO). The IESO demand forecast showed that the reference scenario continued to show robust growth, but with a slightly lower trajectory, with net annual energy demand now expected to grow by about 65% by 2050, or to 250 TWh, compared to 75% growth to 262 TWh in the 2025 APO.

With respect to its procurement activities, bid submissions were due in October (energy) and December (capacity) for the first window of the Long-Term 2 RFP (LT2 RFP). The IESO continued work on the design of the Long Lead-Time (LTT) RFP and contract. The IESO also completed its annual Capacity Auction, procuring 1,832.8 MW of capacity for summer 2025 and 1,125.3 MW for winter 2024/2025. At clearing prices of $645.24/MW-day and $725.31/MW-day, respectively, this reflected significant increases over last year’s prices.

The IESO continued its DER Integration Project under its Enabling Resource Program engagement to address how DERs will be integrated into system operations and markets.

As part of its Corporate Power Purchase Agreement (C-PPA) Framework, the IESO published program guidelines and other materials in advance of next year’s submission window.

The IESO launched its new large-scale DSM incentive program.

The January 2027 to June 2027 Reliability Outlook was released.

As part of its ongoing monitoring of the renewed market, the IESO launched a consultation to address circumstances in which unwanted Real-Time Make-Whole Payments are calculated. The IESO also launched, and sought nominees for, its new Renewed Market Advisory Forum.

The Market Assessment and Compliance Division (MACD) published a Statement of Approach of its enforcement approach towards market participants with hourly demand response resources registering affiliated entities as market participants with their own hourly demand response resources, as well as its 2026 Reliability Standards Compliance Monitoring Plan.

The Technical Panel and the IESO Board of Directors approved a market rule amendment introducing a multi-step tie-break methodology to more equitably divide available capacity.

Legislative and Regulatory

The Ontario Government passed the Bill 40, Protect Ontario by Securing Affordable Energy for Generations Act, 2025. The legislation made several amendments to other energy-related legislation, including:

  • Electricity Act: Adds new statutory purposes to promote economic growth and support the development of a hydrogen market and economy, and expands the IESO’s objectives to include economic growth. It permits, through regulation, certain electricity-related payments to be funded through legislative appropriations, and introduce new provisions restricting electricity distributors and transmitters from connecting certain load facilities unless connection requirements set by regulation are met.
  • Ontario Energy Board Act: Adds economic growth as a new statutory objective of the OEB in relation to electricity regulation. Authorizes the CEO to issue internal procedural policies and implement provisions related to new connection restrictions under the Electricity Act. It also requires the OEB to consider appropriate payments to transmitters in rate-setting, incorporate economic growth into the public interest test for leave to construct applications, and allow deferral and variance accounts for costs related to compliance with Bill 5, Protect Ontario by Unleashing our Economy Act, 2025.
  • Municipal Franchises Act: Removes the requirement for municipal elector approval before granting a utility the right to use or occupy municipal highways, allowing municipalities to do so through a by-law passed by council. It also expanded the OEB’s authority to consider applications from municipalities or gas distributors to renew or extend rights, not only to operate, but also to construct, extend, or add to gas distribution works.

Bill 72, the Buy Ontario Act was also introduced and passed, creating a framework for the issuance of directives to public-sector entities, which would include the IESO, OEB, and OPG, to prioritize Ontario goods and services in public procurement.

Amendments were made to the following regulations:

  • Ontario Regulation 53/05 under the Ontario Energy Board Act to, among other changes, allow recovery of long-term debt interest costs for OPG’s Pickering Refurbishment Project and SMR Project prior to the assets being placed into service, and to establish a framework for the rate regulation of the SMR Project, including permitting equity investments.
  • Ontario Regulation 363/16 under the Ontario Rebate for Electricity Consumers Act, to increase the Ontario Electricity Rebate (OER) amount from 8% to 23.5%.

The Minister of Energy and Mines established the Panel for Utility Leadership and Service Excellence (PULSE) to provide advice on how local distribution companies should evolve to meet growing demand, investment needs, and customer expectations.

The Ontario Government confirmed that refurbishment of OPG’s Pickering Nuclear Generating Station “B” units will go ahead, with execution phase beginning in 2027 and a final budget of $26.8Bn. It also advanced interjurisdictional nuclear partnerships with New York and Nova Scotia, with a New York Power Authority-OPG MOU on collaboration around advanced nuclear technologies (including SMRs) and an Ontario–Nova Scotia agreement to collaborate on the development of SMRs.

The Ministry of Energy and Mines sought public input on:

The Ontario Government announced it had awarded a contract for its feasibility study of building an east-west pipeline and energy corridor.

Three transmission projects were designated as priority projects under section 96.1(1) of the Ontario Energy Board: the Orangeville to Barrie Reconductoring Project (reconductoring a portion of an existing 230 kV line between Orangeville TS and Essa TS), the Windsor to Lakeshore Transmission Project (a double-circuit 320 kV line between Lauzon TS and Lakeshore TS), and the Bowmanville to GTA Transmission Line (a double-circuit 500 kV line between a newly expanded Bowmanville SS and a new or existing GTA station). In parallel, the Minister of Energy and Mines issued a directive designating Hydro One as the transmitter of the Bowmanville to GTA Transmission Line.

The Ministry of Energy and Mines consulted on designating the Red Lake Transmission Project as a priority project and on designating Hydro One as its transmitter. The Minister of Energy and Mines signed a MOU with local First Nations regarding to the construction of the Barrie to Sudbury Transmission Line (a new 500 kV line between Essa TS and Hanmer TS).

Federal Government

The Federal Government announced its 2025 Budget, which confirmed its intention to proceed with the Clean Electricity investment tax credit and proposed removing the conditions for provincial and territorial Crown corporations to be eligible. It also proposed extending the full CCUS investment tax credit rates by five years (2031 to 2035), with rates then unchanged from 2036 to 2040, and indicated it will consult on a potential domestic content requirement for the Clean Technology and Clean Electricity investment tax credits.

It followed up by introducing Bill C-15, the Budget implementation Bill, which includes the Clean Electricity investment tax credit and expanded eligibility under the Clean Technology investment tax credit for SMRs and systems that produce electricity, heat, or both electricity and heat from waste biomass. It also included removal of certain greenwashing provisions added recently to the Competition Act.

Two government bills were introduced in the Senate that have a direct impact on the energy sector.

  • Bill S-3 would update the federal trade measurement framework. It would amend the Weights and Measures Act, by clarifying and expanding the Minister’s and inspectors’ authorities, including permitting sampling when devices are examined, enabling the Minister to require corrective and preventive measures, authorizing entities to calibrate and certify reference standards, and allowing temporary permission to use devices without prior approval or examination in specified circumstances. It would also amend the Electricity and Gas Inspection Act, by broadening the definition of “meter”, providing exemption authority, clarify steps to put a device into service, and adding similar sampling-based examination and corrective and preventive measure authorities, alongside expanded inspector powers.
  • Bill S-4 would modernize the Energy Efficiency Act. The proposed amendments would expand the Act to better address online sales and digital labels, including by broadening who is captured as a dealer and by recognizing labels in digital form. Bill S-4 would also broaden the scope of energy efficiency standards beyond energy use to cover factors such as durability, interoperability, and energy demand, add tools such as regulatory sandboxes and new exemption authorities, and strengthen compliance options, including administrative monetary penalties, prohibitions on false or misleading efficiency representations, and expanded testing, information gathering, and corrective measure powers.

The Federal Government and Government of Alberta signed a MOU that links support for the Pathways Alliance carbon capture and storage project and related supply chains to future privately financed bitumen export pipelines, and commits both governments to use the new Building Canada Act and Major Projects Office framework to streamline approvals, build transmission interties, and support nuclear development in Alberta.

The Canadian Nuclear Safety Commission (CNSC) issued its decision to renew OPG’s licence for its existing Darlington Nuclear Generating Station for 20 years.

The Canada Growth Fund and the Building Ontario Fund, committed up to $2Bn and $1Bn respectively, in minority equity stakes (representing 15% and 7.5%) in OPG’s four-unit SMR project.

FedNor launched the Northern Ontario Indigenous Clean Energy Initiative to support Indigenous communities in developing and expanding local clean energy projects.

Judicial

In West Whitby Landowners Group Inc. v. Elexicon Energy Inc., the Ontario Court of Appeal found that the OEB’s intervention, at the parties’ request, in a cost-sharing dispute about the interpretation of the DSC was subject to judicial review. Although the OEB’s conclusions were conveyed through “views and conclusions” in Staff letters and the OEB did not hold the requested hearing, the Court held that the OEB nonetheless made a binding decision interpreting legal instruments within its exclusive jurisdiction that prescribed the parties’ legal rights and was sufficiently public in nature to attract judicial review. The Court set aside the Divisional Court’s jurisdictional dismissal, confirming that an OEB decision can be reviewable even when communicated informally rather than by formal order.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

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Insights SR Update

2025 Energy Regulatory Year in Review

Happy Holidays. As the year winds down, we are pleased to share the key developments that, in our view, shaped 2025 in our annual Year in Review edition of the Shepherd Rubenstein Energy Regulatory Update.

Ontario energy policy and regulation in 2025 was dominated by two things: the response to the trade war initiated by the United States, and the release of the Integrated Energy Plan (IEP), Energy for Generations. In response to the economic uncertainty and tariff impacts, both the Federal Government and the Ontario Government put in place faster approval frameworks for major energy and infrastructure projects to support investment and broader economic objectives. The IEP, in turn, sets out the province’s longer-term direction for planning for demand growth, procuring new supply, and aligning electricity, fuels, and emerging resources. Its influence can be seen across nearly every theme that follows.

1. Response to the US-Canada Trade War

The trade war with the United States was the dominant theme across the entire country in 2025. In early 2025, as the Trump administration took office, Ontario rolled out its Fortress Am-Can plan, its vision of a renewed U.S.-Canada partnership, with a significant focus on energy. However, with the imposition of tariffs, it became clear that Washington saw its relationship with Canada very differently. In March, as a retaliatory response, Ontario briefly required the IESO to adopt a Tariff Response Charge on certain electricity exports, before the Minister directed the IESO to set the charge to zero.

The economic impact and uncertainty caused by the trade war with the U.S. led both Ottawa and Queen’s Park to focus on the need to speed up approvals of infrastructure, energy, and resource development projects to promote economic development and help diversify export markets.

On the infrastructure and approvals side, Ontario moved first. The Ontario Government introduced and passed Bill 5, the Protect Ontario by Unleashing our Economy Act, which enacts the Special Economic Zones Act, allowing cabinet to designate zones and exempt designated projects or “trusted proponents” from statutes, regulations and municipal by-laws. Later in the year, it also introduced and passed Bill 40, the Protect Ontario by Securing Affordable Energy for Generations Act, which ties energy policy more directly to economic development. Among other things, it adds promoting economic growth and supporting the development of a hydrogen market and economy to the purposes of the Electricity Act and to the IESO’s objectives, and would add economic growth to the OEB’s electricity objectives and its public interest test for leave to construct applications.

Bill 40 also created a new regulatory authority to require certain large data centres to obtain ministerial approval before connecting to the electricity grid, with the aim of prioritizing projects that deliver economic, strategic, security, and community benefits to Ontario. This was a move away from the traditional non-discriminatory approach to customer connections. While Bill 40 was before the legislature, the Ministry of Energy and Mines consulted on regulations to implement this new authority.

At the federal level, Parliament passed Bill C-5, the One Canadian Economy Act. It creates a framework for designating projects of national interest under the new Building Canada Act and routes them through a streamlined single federal approval process, coordinated by a new Major Projects Office (MPO). The first slate of projects referred to the new MPO included OPG’s Darlington SMR project. A number of First Nations have launched a legal challenge to both Bill 5 and C-5.

The Governments of Ontario, Alberta and Saskatchewan signed a MOU to work together on pipelines, rail and other energy and trade infrastructure, and Ontario followed with the launch of the feasibility study for a new east-west economic and energy corridor. The Federal Government and Alberta signed a MOU that links support for the Pathways Alliance carbon capture and storage project and related supply chains to future privately financed bitumen export pipelines, and commits both governments to use the new Building Canada Act and Major Projects Office framework to streamline approvals, build transmission interties and support nuclear development in Alberta.

Separately, the trade war also triggered a series of supply chain and procurement related measures. The Ontario Government implemented a procurement policy that restricts U.S. access to government procurement, which applies to the IESO, OEB, and OPG. Bill 5 also amends the Electricity Act and Ontario Energy Board Act to allow geographic-origin restrictions on the procurement of goods and services by the IESO, OPG, gas utilities and electricity licencees, and is backed by proposed regulations that would limit the use of certain foreign suppliers in critical energy infrastructure. Bill 40 made amendments to Bill 5 to expand and clarify the scope of geographic-based restrictions on procurements to certain OEB regulated entities. Feedback was sought regarding the scope of implementing regulations. In late Fall, Bill 72, the Buy Ontario Act was introduced and passed, creating a framework for the issuance of directives to public-sector entities, which would include the IESO, OEB, and OPG, to prioritize Ontario goods and services in public procurement.

2. Demand and the Need For Supply

Demand and procurement policies continued to move together in 2025. The IESO updated its long-term outlook, while the Ontario Government used the IEP and new directives to frame how that demand will be met through new supply, regulatory changes, and closer coordination across agencies and the sector.

The IESO’s 2025 Annual Planning Outlook (APO) forecasted that net annual energy demand will increase by about 75% by 2050, significantly higher than the previous forecast, driven by electrification, Electric Vehicle (EV) manufacturing, data centres, and population growth. In late November, the IESO presented the demand forecast to be included in its 2026 APO. The IESO demand forecast showed that the reference scenario still shows robust growth but with a slightly lower trajectory, with net annual energy demand now expected to grow by about 65% to 2050, or 250 TWh, compared to the 75% growth to 262 TWh in the 2025 APO.

On the supply side, the IEP sets out the province’s integrated approach to meeting this growth. It outlines a new framework that brings electricity, fuels, and other energy sources into a single coordinated planning process and emphasizes new nuclear, hydro, and storage investments to meet a projected 75% rise in electricity demand by 2050. The IEP highlights plans to build additional nuclear capacity, including small modular reactors, expand and refurbish hydroelectric facilities, and rely on regular competitive procurements to add clean dispatchable generation.

The IESO’s procurement work reflected this direction. It concluded the second Medium-Term Procurement RFP (MT2 RFP), signing contracts with 27 proponents for a total of 3,001 MW across energy and capacity streams. Work on the Long Term 2 RFP (LT2 RFP) continued, with an updated draft RFP, contract documents, with the first window proposal deadlines for the energy and capacity streams taking place in October and December. In late June, the IESO received a directive from the Minister of Energy and Mines requiring LT2 RFP to include an incentive for Canadian proponents. The IESO also consulted on a Local Generation Program for new and re-contracted distribution connected resources between 100 kW and 10 MW, and reported to the Ministry on the design of a future Long Lead-Time (LTT) RFP, which will bring longer development projects into the procurement pipeline.

Other supply initiatives were advanced outside the competitive RFPs but are closely linked to future procurement needs. The Ontario Government announced that it is advancing pre-development work on the Ontario Pumped Storage Project, a partnership between TC Energy and the Saugeen Ojibway Nation, and directed the IESO to finalize a cost recovery agreement for those pre-development expenses. It also asked OPG to explore new nuclear generation at its Wesleyville site and reiterated support for OPG’s plan to refurbish and expand hydroelectric stations in Northern Ontario.  The Ontario Government moved ahead with regulatory changes intended to support new supply and financing tools, including amendments that create a framework for corporate power purchase agreements between Industrial Conservation Initiative participants and non-emitting generators, and proposed regulatory changes that would allow OPG to record pre-development costs for new hydroelectric projects for recovery.

3. Nuclear Expansion

In 2025, nuclear moved forward on several fronts, most notably concrete decisions on Darlington’s Small Modular Reactors (SMRs) and the Pickering B refurbishment, while the IEP confirms that new and refurbished nuclear remains a key and growing part of the future supply mix.

At Darlington, the Canadian Nuclear Safety Commission (CNSC) issued its decision to renew OPG’s licence for its existing Darlington Nuclear Generation Station for 20 years, as well as a licence to construct the first BWRX-300 SMR. The Ontario Government approved OPG’s plan to begin construction of the first of four units. OPG currently estimates the total cost of the four-unit SMR build at about $20.9Bn. The Federal and Ontario Governments announced an equity financing package for the Darlington New Nuclear Project. Through the Canada Growth Fund and the Building Ontario Fund, they committed up to $2Bn and $1Bn respectively, in minority equity stakes alongside OPG in the four-unit SMR project. The Federal Government also included the Darlington SMR as one of the first projects referred to the new Major Projects Office.

At Pickering, the Ontario Government approved OPG’s plan to proceed with the project definition phase on the “B” units, and then in late November confirmed that refurbishment will go ahead. The CNSC also issued its Record of Decision extending the operation of Units 5 to 8 to the end of 2026.

To support its plans at Darlington and Pickering, regulatory amendments were made so OPG could record more of the costs needed for Pickering refurbishment for later OEB review.  It also proposed changes to allow concurrent recovery of debt costs during construction of the Darlington SMRs and Pickering refurbishment, and to permit OPG to bring equity partners into the Darlington SMRs while maintaining prescribed generator status.

The Minister of Energy and Mines also directed the IESO to continue its New Nuclear Feasibility Study with OPG and Bruce Power, looking at both additional large units and SMRs. In a separate announcement, it asked OPG to explore new nuclear opportunities at its Wesleyville site, following interest from local municipalities and the Williams Treaties First Nations.

4. Transmission and System Planning

The IEP puts transmission at the centre of how Ontario will manage growth and electrification, including the need for significant new transmission infrastructure across the province. The plan also commits to a more formal transmitter selection framework, including a transmitter registry. On the planning side, the IEP outlines an updated regional and bulk planning processes, so they are more responsive to demand growth, including a gas-electric coordination forum, common demand scenarios used by both gas and electricity distributors, and a Major Project Identification Committee to act as an early warning system for large projects.

The IEP implementation directive required the IESO to integrate multiple demand scenarios into its long-term planning documents, to continue developing a competitive transmitter selection framework, and to launch a Transmitter Selection Framework registry of eligible transmitters. The IEP directive to the OEB required it to establish a gas and electricity coordination forum, set planning expectations that use multiple demand scenarios and updated economic and cost assumptions, and work with the IESO to review and update regional and bulk planning processes so they are more responsive to rapid demand growth. The OEB responded by launching a Regional and Bulk Electricity System Planning Review and a Streamlined Transmission Connections Review, each supported by stakeholder advisory groups. In December, the OEB announced the launch of the Gas-Electric Co-ordination and Information Sharing consultation and forum, and released a discussion paper.

In a parallel proposal to what is being considered for the distribution sector, the Ontario Government consulted on revised cost responsibility for line and transformer connection assets in high growth areas, allowing transmitters to build connection capacity in anticipation of future customers while sharing the cost and risk more broadly than a single first mover.

The IESO and the province also advanced a number of specific transmission projects. The Ontario Government consulted on declaring several new projects as priority transmission projects and, in most cases, designating Hydro One as the transmitter, including the Greenstone line, Windsor–Lakeshore, an Orangeville-Barrie reconductoring line, and new Barrie-Sudbury transmission lines. The IESO undertook work on options for a third transmission line into downtown Toronto and made a preliminary assessment favouring a new underwater HVDC line from Bowmanville to the city, with a target in-service date around 2034. The Ontario  Government also consulted on designating the Red Lake Transmission Project as a priority project and on designating Hydro One as its transmitter.

In advancing competitive transmission procurement, the IESO launched its Transmission Selection Framework (TSF) Registry, and continued work on the commercial aspects of the TSF.

The OEB determined several outstanding issues in Phase 2 of its generic Uniform Transmission Rates hearing, issued new power quality and reliability reporting requirements for transmitters, and released new filing guidelines for transmission rate applications which included an approach for single-asset transmitters.

5. Natural Gas Policy

The IEP included a Natural Gas Policy Statement that confirms policy to maintain natural gas as a reliable part of the energy system. The Natural Gas Policy Statement commits to targeted system expansions, opposing federal limits on gas heating, increasing the use of RNG, and keeping the network resilient and customer focused while integrating lower carbon resources. The Ontario Government also directed the OEB to take into account the policy statement in considering the future role of natural gas in Ontario’s energy system.

This past year, the OEB decided the remaining unsettled issues in Phase 2 of Enbridge’s 2024 to 2028 rate application. Phase 3 then proceeded during the year, focusing on rate harmonization, cost allocation, and rate design, with negotiations among more than 20 stakeholders resulted in a comprehensive settlement.

As it related to Integrated Resource Planning (IRP), the OEB approved Enbridge Gas’s Southern Lake Huron IRP pilot with modifications, shifting funding away from hybrid heating and gas heat pumps toward electrification measures. However, in a highly unusual step, on the same day it issued on its own motion a review of aspects of that decision and announced a broader review and evaluation of the IRP Framework. That IRP Framework Review began later in the year with the release of a staff discussion paper on how IRP is being implemented, its impact on ratepayers, and potential improvements to how Enbridge plans for system needs. In light of the IRP Framework Review, the OEB decided not to proceed with its own motion to review.

The OEB granted Enbridge Gas leave to construct the St. Laurent Replacement Project in Ottawa, approving the replacement following its earlier 2022 denial, and the company filed its five-year Gas Supply Plan for OEB review and approval. The Ministry of Energy and Mines sought input on the future of the Ontario Natural Gas Expansion Program, while the OEB initiated a generic proceeding on the Model Franchise Agreement.

As it relates to electricity, the Natural Gas Policy Statement discussed that natural gas-fired generation will remain important to maintain reliability and meet peak demand, and that a premature phase-out would not be feasible and would harm consumers and the economy. To support gas projects in the LT2 capacity stream, the Minister of Energy and Mines directed the IESO to address gas transmission cost uncertainty, and in response the IESO added a contractual mechanism that allows recovery of a portion of any required gas transmission upgrade costs.

At the federal level, the government amended regulations under the Greenhouse Gas Pollution Pricing Act to set the fuel charge rates for all fuels to zero effective April 1, 2025, effectively eliminating the consumer carbon charge. The OEB subsequently approved applications by Enbridge Gas and EPCOR to adjust customer rates to reflect the removal of the charge.

6. Distribution Sector Evolution

In 2025, there was a major focus on the electricity distributor sector, with a number of reviews and consultations that will shape future rules for connections, reliability, ratemaking, and investment.

On the connections side, the IEP implementation directive asked the OEB to look at how it can streamline its own processes and review distributor connection procedures to reduce timelines and support faster project development. As a result, the OEB launched the Distribution Customer Connections Review to examine distribution connection processes for new load customers, supported by a working group. As part of implementing its earlier Report on System Expansion for Housing Developments, the OEB amended the Distribution System Code (DSC) to establish a Capacity Allocation Model (CAM) for housing connections, it also clarified the application of the 40-year residential revenue horizon, and provided CAM implementation guidance, including plans for a generic deferral and variance account to track CAM related costs. The Ontario Government also consulted on a proposed regulation that would adjust cost responsibility rules for certain distribution customer connection facilities in clearly high growth areas, so that first movers do not bear the full cost of oversized assets and distributors can build some advance capacity where future load is likely.

Reliability and resilience remained a focus. Through its Reliability and Power Quality Review, the OEB amended the Reporting and Recordkeeping Requirements to give better visibility into distributor performance during severe weather and into customer interruptions caused upstream, and set the first reliability performance improvement targets that will apply to distributors filing new base rates beginning in 2027. It also finalized DSC amendments that set minimum requirements for how distributors communicate with customers during widespread outages. The OEB also issued the Vulnerability Assessment and System Hardening report and toolkit.

In addition to all the work the OEB has been doing with respect to Distributed Energy Resources (DERs), Distribution System Operator (DSO) and Non-Wires Solutions (NWS), including the launch of the Phase 2 consultation on its Benefit-Cost Analysis (BCA) Framework for Addressing Electricity System Needs, it issued guidance to distributors on how to incorporate innovation related proposals into rate applications.

Ratemaking tools for distributors continued to evolve. Early in the year, the OEB launched consultations on Spending Pattern Analysis and to review and update its Total Cost Benchmarking, including Total Factor Productivity, both to inform future use of these tools in price cap indices and cost performance assessments. It also issued a staff discussion paper on Performance Incentive Mechanisms and a separate staff report on its review and evaluation of the Incremental Capital Module, each with stakeholder meetings request for comment.

The OEB issued its decision on a new Cost of Capital Framework for regulated utilities that, among other things, set the 2025 return on equity at 9% while maintaining existing deemed capital structures. In late fall, the Minister of Energy and Mines established the Panel for Utility Leadership and Service Excellence (PULSE) to provide advice on how local distribution companies should evolve to meet growing demand, investment needs and customer expectations.

7. Advancing Distributed Energy Resources

Ontario continued to advance a comprehensive framework for integrating DERs into both planning and operations across the electricity system.

The IEP asks utilities to plan for DERs, EV chargers, and customer-side storage, and highlights performance-based regulation and better data access as tools to keep the grid reliable and flexible.  The IEP implementation directives require the IESO to enable broader DER eligibility in procurements and ensure planning processes take cost-effective DER deployment into account, and require the OEB to review DER valuation, recommend an updated compensation framework with the IESO, ensure planning processes consider cost-effective DERs and NWS, continue improving connection processes and data sharing, and set out a roadmap for enabling DSO functions.

Even before the IEP was released, the OEB had launched a consultation on DSO capabilities. It released a discussion paper and consultant report on the functions and capabilities that might be required of future DSOs, and hosted a two-day stakeholder symposium on the topic and a further stakeholder meeting.

DER Connection rules and data requirements were also updated. As part of its DER Connection Review, the OEB revised the DSC and Distributed Energy Resources Connection Procedures to address, among other matters, to further enhance access, standardize connection practices, and simplify processes to reduce connection costs and timelines, and increase the capacity limited for micro-generation, and exemption. The OEB also set out requirements for distributors to submit DER hosting capacity data ahead of the launch of its Centralized Capacity Information Map.

EV Charging (EVC) Rate will begin to be offered by distributors in the new year, after the OEB released EV Charging (EVC) Rate Report.

On DER value and NWS, the OEB and IESO released their joint study on DER compensation mechanisms and the OEB launched a DER value consultation. To further incent distributors to use third-party DERs to meet distribution system needs, the OEB proposed and then made final, amendments to the DSC to include a 25 per cent Margin on Payments incentive for such non-wires alternatives, supported by a consultant report on design options.

The IESO continued its DER Integration Project under its Enabling Resource Program engagement to address how DERs will be integrated into system operations and markets, and as discussed earlier, worked towards the launch of the Local Generation Program. 

8. Conservation Scale-up

Conservation policy shifted meaningfully in 2025, as the province moved from a short-term framework to a long-term system-wide approach to electricity and gas and demand-side management.

In January, the Ontario Government announced a new 2025–2036 Electricity Demand-Side Management (eDSM) Framework, providing a 12-year budget of $10.9Bn to be delivered through a series of three-year program plans with a midpoint review in 2030. The first 2025-2027 plan has a budget of about $1.8Bn and targets 900 MW of peak demand reduction and 4.6 TWh of energy savings by the end of 2027, largely through expanded Save on Energy programming for residential, commercial, and industrial customers. The new eDSM Framework includes 12 continuing or expanding programs and 2 new programs, the Home Renovation Savings Program, and Small Business Peak Perks. Notably, the framework features an expanded Local Initiative Program and a requirement to deliver residential and low-income programs with Enbridge Gas through a single delivery window. The Ontario Government also directed the IESO to implement beneficial electrification measures aimed at promoting electrification and the use of electricity to reduce emissions.   

Energy efficiency features prominently in the IEP, which highlights the new framework as a central tool for managing demand growth and reducing infrastructure needs. The province links the investment to projected peak demand reductions of about 3,000 MW and significant long-term system cost savings, and positions expanded electricity and gas efficiency programs, improved data access, and higher efficiency standards as part of the broader strategy for affordability and system reliability.

The OEB launched a consultation on the appropriate regulatory treatment of local eDSM programs that provide both system and local distribution benefits (known as ‘Stream 2’ programs), based on a report filed by an IESO-LDC working group proposing a shared funding model for distributor programs that address local distribution needs while providing bulk system value.

The IESO also began initial consultations on the work it was starting to undertake for the next provincial eDSM Achievable Potential Study. The Minister of Energy and Mines consulted on the existing interruptible rate pilot for large electricity customers to help inform the design of an expanded pilot or a potential permanent program.

Changes in federal carbon policy also affected gas conservation planning and delayed consideration of Enbridge Gas’s next multi-year DSM plan. As a result of the Federal Government’s effective elimination of the fuel charge under the Greenhouse Gas Pollution Pricing Act, Enbridge Gas asked the OEB to place its 2026 to 2030 DSM Plan, which it had filed in late 2024, in abeyance while it assessed the impacts and prepared an updated plan. Given the time required to develop a revised multi-year proposal, Enbridge filed a revised application, which the OEB approved, to roll forward the approved 2023-2025 DSM Plan to the 2026 program year.

9. Indigenous Energy Participation

Indigenous participation continued to assume greater importance in 2025, as governments and regulators framed new planning, funding and approval tools around Indigenous leadership in the energy system. The IEP identified Indigenous leadership and participation in energy projects as a core theme and asked how government policy and regulatory direction can better support that role in both planning and project development.

In Ontario, that direction was reflected in a Minister of Energy and Mines IEP directive to the IESO focused on Indigenous leadership and capacity, including increased support for early engagement and participation in energy projects. A separate directive approved higher annual funding for the Indigenous Energy Support Program and expanded its mandate to support planning, capacity building and participation in generation and transmission projects.

The Ontario Government also announced support for new OPG hydroelectric projects involving Taykwa Tagamou Nation and Moose Cree First Nation, and as mentioned earlier, consulted on regulatory changes to allow OPG to enter into equity partnership arrangements, including Indigenous communities, for its Darlington SMR project, while remaining OEB rate-regulated.  It also signed an MOU with five First Nations to work together to construct, with Hydro One, the proposed Barrie-Sudbury transmission line. The OEB launched its second Innovation Sandbox Application Challenge, including a dedicated stream to advance Indigenous participation and leadership in innovative energy solutions.

In 2025, the Federal Government implemented its previously proposed Indigenous Loan Guarantee Program (ILGP) through the Canada Indigenous Loan Guarantee Corporation and formally launched the $5Bn ILGP, positioning it as a way to enable Indigenous communities to share in the economic opportunities of major resource and energy projects. Later in the year, the Federal Government announced that it would double the program envelope from $5Bn to $10Bn, and open eligibility beyond energy and natural resources to a wider range of infrastructure, transportation and trade projects, linking ILGP to broader nation-building and economic reconciliation objectives.

Through the implementation of the Building Canada Act enacted under C-5, the Federal Government has emphasized that Indigenous equity participation and partnership are central to how projects will be designated as being in the national interest and eligible for a streamlined approval process.

Natural Resources Canada advanced the Indigenous-Led Clean Energy stream under the Smart Renewables and Electrification Pathways Program, providing funding for Indigenous renewable generation, storage and planning activities. FedNor launched the Northern Ontario Indigenous Clean Energy Initiative to support Indigenous communities in developing and expanding local clean energy projects.

The courts also reinforced the growing importance of Indigenous involvement. In Kebaowek First Nation v. Canadian Nuclear Laboratories, the Federal Court held that the CNSC must consider UNDRIP when assessing the duty to consult on major projects, confirming that UNDRIP informs the interpretation of section 35 and must guide meaningful consultation in project decisions. The decision is under appeal.

10. Renewed Electricity Market Launch

After more than 8 years of planning, the IESO completed its Market Renewal Program, and launched Ontario’s revised whole electricity market on May 1st. The renewed market now includes new Real-Time and Day-Ahead Markets, with locational marginal pricing.

In advance of the launch, the OEB heard and dismissed a challenge by a group of non-quick start gas-fired electricity generators seeking to revoke the Market Rule amendments implementing the IESO’s Market Renewal Program. The OEB rejected the claim that the amendments were unjustly discriminatory and inconsistent with the purposes of the Electricity Act. The IESO also adopted an urgent market rule amendment to correct two errors.

Since the launch, the renewed market has produced higher and more frequent real-time price spikes, elevated operating reserve prices, and pronounced zonal price differences, particularly during periods of transmission outages or export constraints.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

Categories
SR Update

Energy Regulatory Update (Q3, 2025)

Welcome to the latest edition of the Shepherd Rubenstein Energy Regulatory Update, our quarterly round-up of important developments in Ontario’s energy sector. Below you’ll find a summary of the regulatory and policy activity from July through September (and the first few days of October).

Ontario Energy Board

The OEB issued a number of notable decisions over the last few months, including:

As part of work required under the Integrated Energy Plan implementation directive, the OEB launched several reviews:

Notice of final amendments to the Distribution System Code (DSC) was issued to implement a Capacity Allocation Model (CAM) to facilitate housing development connections, along with supplementary amendments clarifying the application of the 40-year residential customer revenue horizon. The OEB also issued guidance on the implementation of the CAM and announced plans to establish a generic deferral and variance account to record CAM-related costs.

The OEB initiated a consultation to review the Accounting Procedures Handbook (APH) and announced the membership of an APH working group to support the review. It also launched a consultation on a regulatory framework for local electricity demand-side management (eDSM) led by distributors and co-funded by the IESO (Stream 2 programs), based on a report filed by a joint IESO-LDC working group.

A draft final version of its Vulnerability Assessment and System Hardening (VASH) Report was issued for comment.

Through its Reliability and Power Quality Review (RPQR) initiative, the OEB amended the Reporting and Recordkeeping Requirements (RRR) for distributors to provide greater insight into distribution performance during severe weather, and improved visibility into customer interruptions caused upstream. It also provided the first reliability performance improvment targets, which will be applied when distributors file for new base rates effective beginning in 2027.

In preparation for the launch of the Electric Vehicle Charging (EVC) Rate, the OEB provided communication materials to electricity distributors. It also set out requirements for distributors to submit DER hosting capacity data in advance of the launch of the OEB’s Centralized Capacity Information Map. The joint OEB/IESO-commissioned study on DER compensation mechanisms was also released.

The Innovation Sandbox held a webinar and released a proponent guide and materials for its second Innovation Sandbox Challenge, focused on empowering indigenous innovation and leadership. It’s most recent Annual Report was also released.

The OEB published the 2024 electricity distributor scorecards, the total cost benchmarking update and stretch factor assignments, 2024 Activity and Program Benchmarking (APB) results.

The Market Surveillance Panel issued a report focused on its mandate in the context of the IESO’s renewed market.

The OEB issued version 3.0 of the Ontario Cyber Security Standard.

The Government of Ontario appointed Geoff Owen as the new Chair of the OEB’s Board of Directors. The OEB’s Board appointed Carolyn Calwell as the new CEO. In addition, a new Memorandum of Understanding between the OEB and the Ministry of Energy and Mines was signed, and the OEB’s Business Plan was approved by the Minister.

Independent Electricity System Operator

Proponent registration took place for the first window of the Long-Term 2 (LT2) RFP (energy and capacity streams), and the IESO issued responses to RFP questions. It also released two addenda to the contracts, one addressing recovery of certain transmission connection costs above a transmitter’s connection reference cost, and another addressing recovery of natural gas transmission system costs incurred by a successful natural gas generation proponent. The need for the latter was subject to a letter from the Minister of Energy and Mines to the IESO. Proposal submission deadlines are October 16 (energy) and December 18 (capacity).

The IESO provided stakeholders with a summary of its August report to the Ministry of Energy and Mines on the development and design of a Long-Lead Time (LTT) RFP.

The Minister of Energy and Mines issued a procurement directive to the IESO to design and launch a new Hydrogen Innovation Fund, making up to $15M in funding available for electricity-related projects and another $15M (funded by the government) for broader-sector projects. As part of this initiative, the IESO launched a stakeholder engagement in advance of the project submission window.

The IESO launched its Transmitter Selection Framework registry, and engagement for its next provincial eDSM Achievable Potential Study.

The Technical Panel approved Market Rule amendments to enhance the Capacity Auction by tightening penalties for unfulfilled commitments (raising buy-out charges and removing the deposit-forfeiture option), expanding obligation transfers across all resource types, and moving system-backed imports to the self-scheduling test framework. The IESO Board of Directors adopted the Technical Panel’s previously approved changes to its terms of reference, addressing administrative updates and the process for future amendments. The IESO held a stakeholder meeting to discuss its proposed changes to the requirement that the IESO Board directly set certain technical market parameters used in the calculation engines.

The IESO published:

Work was also completed on the design of the eDSM Industrial Program.

The IESO provided its preliminary evaluation of options for a third transmission supply line to Toronto. Its preferred option is a new underwater HVDC transmission line from Bowmanville SS across Lake Ontario to downtown Toronto, with a target in-service date of around 2034.

Legislative and Regulatory

The Governments of Ontario, Alberta, and Saskatchewan signed a Memorandum of Understanding to support the construction of new pipelines, rail lines, and other energy and trade infrastructure. The Ontario Government also issued a RFP for a feasibility study on establishing a new east-west economic and energy corridor.

The Ministry of Energy and Mines sought public input on:

The Ontario Government amended Ontario Regulation 288/14 to include as an “other objective” of the IESO, to engage in activities and support for facilitation of the hydrogen market and economy in Ontario as a cleaner energy source.

Federal Government

The Federal Government launched the new Major Projects Office (MPO) and identified the first series of projects referred to the MPO for consideration, including OPG’s Darlington New Nuclear Project.

The Minister of Energy and Natural Resources announced $13M in funding for five grid-modernization projects in Ontario. Natural Resources Canada also issued a Request for Information to gather input on opportunities for AI to accelerate energy innovation.

Judicial

In Procureur Général du Québec v. Duquette, the Quebec Court of Appeal overturned a ruling that had struck down disciplinary rules for Régie de l’énergie commissioners. The case arose from a complaint against a commissioner that was dismissed but later challenged on the basis that the disciplinary regime compromised independence. The Court held that the Règlement sur l’éthique et la déontologie des administrateurs publics (Quebec’s ethics and discipline regulation for public administrators), the Régie’s Code of Ethics, and commissioners’ terms of appointment form a coherent regime that protects against arbitrary removal. While the Régie carries out some quasi-judicial functions, the Court emphasized it remains an administrative body, and the disciplinary framework adequately safeguards independence.

In Morguard v. Alectra, the Ontario Superior Court dismissed a negligence claim after a planned outage in extreme cold caused pipes to burst. The Court accepted the outage caused the damage but found Alectra acted within its Conditions of Service, which permit outages and place responsibility for backup on customers. Since the customer, Morguard, cooperated in scheduling and raised no objections, there was no breach of duty and the claim was dismissed.

Shepherd Rubenstein News

Both Jay Shepherd and Mark Rubenstein were listed in the 2026 edition of ‘Best Lawyers’. Mark was ranked by Chambers Canada in its 2026 guide.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

Categories
SR Update

Energy Regulatory Update (Q2, 2025)

Summer has arrived, along with the latest edition of the Shepherd Rubenstein Energy Regulatory Update, our quarterly round-up of key developments in Ontario’s energy sector. This edition covers the period from April to June, highlighted by the release of the Ontario Government’s Integrated Energy Plan.

Integrated Energy Plan

On June 12th, the Ontario Government released its first Integrated Energy Plan (IEP), Energy for Generations. The IEP is meant to be the Government’s comprehensive roadmap for meeting future energy needs through a single coordinated strategy across different energy types (including electricity, natural gas, and hydrogen) and outlines a host of measures that it has undertaken and expects to continue.

The IEP includes the Government’s policy regarding:

  • Integrated Energy Planning. The IEP sets out a new integrated approach to energy planning that brings together electricity, fuels, and other energy sources under a single, coordinated framework. It outlines a governance structure led by the Ministry of Energy to ensure alignment across agencies like the IESO and OEB. Future planning will use scenario modelling and cross-sector analysis. This integrated approach aims to replace past fragmentation with long-term, system-wide coordination.
  • Affordable, Secure, Reliable, and Clean Electricity. To meet a projected 75% rise in demand by 2050, the IEP sets out new nuclear, hydro, and storage investments. It discusses Ontario’s plan to build new SMRs, expand hydro facilities, and refurbish existing nuclear units. Additionally, regular competitive procurements will add clean, dispatchable generation.
  • Electricity Transmission. The IEP outlines Ontario’s plan for more than 5,000 km of new and upgraded transmission lines to support economic growth and connect new supply. Priority lines will serve EV hubs in the southwest, enable northern mining, and connect remote Indigenous communities. A new planning division will streamline project delivery and approvals.
  • Future Electricity Grid. To handle decentralized technologies and shifting demand, the IEP calls for utilities to plan for DERs, EV chargers, and customer-side storage. The IEP also discusses how performance-based regulation and improved data access will support utility accountability and customer engagement to ensure the grid remains reliable, flexible, and ready for emerging needs.
  • Natural Gas Policy Statement. The IEP confirms Ontario’s plan to maintain natural gas as a reliable. The province will support targeted system expansions, oppose federal limits on gas heating, and increase the use of RNG. Future efforts will focus on keeping the network resilient and customer-focused, while advancing low-carbon integration. Natural gas will continue to support peak electricity, heating, and industrial needs.
  • Energy Efficiency. The IEP prioritizes energy efficiency to manage demand growth and reduce infrastructure needs. It discusses Ontario’s previously announced plan to invest $10.9 billion over 12 years in expanded electricity and gas programs, which is expected to reduce peak demand by 3,000 MW and lower long-term system costs.
  • Indigenous Leadership and Participation. The IEP commits to deeper Indigenous partnerships in Ontario’s energy sector. The plan expands opportunities for equity participation, local planning, and clean energy access. Future investments will support remote community connections and Indigenous-led projects. These measures aim to build lasting partnerships and deliver inclusive energy development.
  • Leveraging Other Energy Resources. Ontario plans to scale up hydrogen, RNG, and biofuels to diversify supply and reduce emissions. The IEP supports early hydrogen adoption in industry and transport, with infrastructure investment and pilot projects. RNG integration into gas networks will continue, alongside support for municipal and industrial production.
  • Ontario as a Global Energy Superpower. The IEP outlines Ontario’s plan to expand its global energy presence through exports, innovation, and nuclear leadership, including support for new interties, SMR commercialization, and clean tech sector growth.

At the same time, the Minister of Energy and Minis issued detailed implementation directives to each of the IESO and OEB.

The Minister’s directive to the IESO, includes among many other matters:

  • Planning. As part of its planning process, the IESO must integrate multiple demand scenarios into long-term planning documents, incorporating high-growth and less-probable scenarios with qualitative and quantitative risk assessments. These projections should encompass employment, population, housing, and extreme weather trends. It must coordinate assumptions with the OEB, participate in integrated planning forums, and consult the Ministry and stakeholders before finalizing scenarios.
  • Streamline Processes. The IESO must report back on actions to streamline its energy procurement processes, especially those critical to government priorities. It is also tasked with improving transparency in the connection process by proposing clear timelines and potential service standards.
  • Indigenous Participation. The IESO is required to enhance its engagement practices with Indigenous communities, including providing reasonable access to capacity funding to support meaningful participation in procurement design.
  • DERs. The Minister has directed the IESO to enable broader DER eligibility in procurements, ensure planning processes take cost-effective DER deployment into account, and support the OEB with its DER initiatives (including DER valuation, distributor-led procurements, and data collection and sharing).
  • Transmission. The IESO must continue developing a competitive process for transmitter selection and launch Transmitter Registry initiatives.
  • Nuclear. The IESO is tasked with advancing the next steps in Ontario’s New Nuclear Feasibility Study, collaborating with Ontario Power Generation (OPG) and Bruce Power to evaluate and conduct early planning for additional nuclear generation, including both large-scale projects and SMRs.
  • Northern Hydro Program. The directive calls for the launch of the Northern Hydro Program by the end of March 2026.

The Minister’s directive to the OEB, includes, among other matters:

  • Planning. Directing the OEB to establish an ongoing gas-electric coordination and information-sharing forum to support integrated energy planning. It is tasked with setting expectations for electricity and natural gas distributors to use multiple demand scenarios and incorporate economic trends, cost forecasts, and other planning assumptions into their planning frameworks. Additionally, the OEB must collaborate with the IESO to review and update regional and bulk planning processes, ensuring they are more responsive to rapid demand growth, particularly in high-growth regions.
  • DERs. Requiring the OEB to review DER valuation and, in coordination with the IESO, provide recommendations on an updated regulatory and compensation framework that reflects the value DERs bring to the system. The OEB must also ensure that planning processes account for cost-effective DER deployment, explore mechanisms to support distributor investment in DERs and non-wires alternatives (including across boundaries), continue work to improve the connection process, enhance data collection and sharing, and define a roadmap for enabling Distribution System Operator (DSO) functions.
  • Natural Gas Policy Statement. Requiring the OEB to consider the government’s Natural Gas Policy Statement (included in the IEP) in its evaluation of the future role of natural gas in Ontario’s energy system.
  • Streamline Processes. Directing the OEB to report on opportunities to streamline its own processes to support rapid energy project development and to review both transmitter and electricity distributor connection procedures to enhance efficiency, reduce timelines, and facilitate faster project development.
  • Expanded Mandate. The OEB must report back on the scope, timing, and resourcing considerations for a potential expansion of its mandate to reflect the evolving energy landscape, including hydrogen pipeline, district energy, and rate regulation for long-life electricity projects.

The Minister of Energy and Mines also released the Cost-Effective Energy Pathways Study that it has previously commissioned.

Ontario Energy Board

The OEB issued a number of notable decisions over the last few months, including:

As part of the implementation of the Report on System Expansion for Housing Developments, the OEB issued both a Notice of Proposal and a Final Notice to amend the Distribution System Code (DSC), establishing a Capacity Allocation Model (CAM) to facilitate connections for housing developments. The CAM was developed primarily based on input from the previously announced CAM Advisory Group.

There was a significant amount of new and on-going policy work, the OEB:

To further incent electricity distributors to use third-party DERs as non-wires alternatives, the OEB issued a Notice of Proposal to Amend the DSC to include a 25% Margin on Payments (MoP) incentive for such uses when meeting a distribution system need. As part of the Notice, the OEB released a consultant report that informed the specifics of the OEB’s proposal.

The OEB released a draft for comment and held a stakeholder meeting on its proposed update to the Filing Requirements for electricity transmission rate applications, including guidance on the revenue requirement framework for single-asset transmitters.

The CEO issued her annual end of fiscal year progress update letter.

The OEB announced the launch of its second Innovation Sandbox Challenge focused on empowering Indigenous innovation and leadership.

In time for the Market Renewal Program (MRP) go-live date, finalized accounting guidance was provided to electricity distributors regarding the impact on commodity-pass through accounts. 

The OEB provided calculations on the 2026 inflation parameters, as well as issued orders setting the 2026 distribution pole attachment charge, and energy retainer service charges. It also established a deferral account to record impacts arising from the implementation of the Electric Vehicle Charging Rate.

As part of Phase 2 of its capacity information map project, the OEB issued a letter providing direction to electricity distributors to submit standardized data on system capacity to connect new loads, to support the development of a centralized, distribution-level Geographic Information System based Centralized Capacity Information Map.

An Assurance Voluntary Compliance was accepted from Bracebridge Generation Ltd., related to operating in the market without a generator’s license. The OEB also released its Annual Compliance Report (April 2024-March 2025).

Work was advanced on implementing several initiatives under its 10-point Action Plan, outlined in its September 2024 Report Back to the Minister on Intervenors and Regulatory Efficiency, by updating the cost award tariff, issuing a proposal for comment on categorizing intervenors by interest, and launching a pilot for the use of technology and process changes aimed at increasing collaboration and reducing duplication of interrogatories.

Independent Electricity System Operator

The IESO’s Market Renewal Program went live as scheduled on May 1st. Ontario’s electricity wholesale market is now operating with its new Real-Time and Day-Ahead Markets, with locational marginal pricing.  In advance, as a result of final testing, an urgent market rule amendment was adopted to correct two errors that would have resulted in a misalignment between the intended design that were built into the settlement tools and the wording of the Market Rules.

The IESO released the 2025 Annual Planning Outlook (APO). The APO forecasts a 75% increase in net annual energy demand by 2050, and significantly higher than what was forecast in 2024, driven by electrification, EV manufacturing, data centers, and population growth. The APO discusses the IESO’s plan to meet this rising demand, through its plans for major procurements of generation, storage, and transmission, alongside expanded energy efficiency programs and demand-side management.

As part of its procurement work, the IESO concluded its second Medium-Term Procurement (MT2 RFP) by executing contracts with 27 proponents, securing a total of 3,001 MW of capacity. The MT2 RFP energy stream secured 994.97 MW from 19 proponents, while the capacity stream secured 2,006 MW from 8 proponents.

Stakeholder engagement continued for the upcoming Long-Term 2 RFP (LT2 RFP), including the release of updated draft RFP and contract documents. The first submission windows (LT2-W1) for the capacity and energy streams are expected in October and December, respectively. In late June, the IESO received a directive from the Minister of Energy and Mines to include, as part of LT2-W1, an incentive for Canadian proponents.

The IESO also engaged stakeholders in the development of a Local Generation Program targeting both new builds and re-contracting of distribution-connected resources between 100 kW and 10 MW, in advance of its required report back to the Minister in July. Engagement also began on design considerations for a potential Long Lead-Time RFP (LLT RFP).

The IESO advanced work on a planned Transmitter Selection Framework (TSF), including the design and rules for a TSF Registry of eligible transmitters that could participate in future TSF procurements. Under the IEP implementation directive to the IESO, the TSF Registry is required to be launched by mid-August.

The Minister of Energy and Mines issued a directive to the IESO approving an increase in annual funding for the Indigenous Energy Support Program from $10M to $25M.

The Ontario government and the IESO announced they are advancing plans for a third transmission line into downtown Toronto to address future electricity demand. The IESO has proposed three potential routes and is leading public and Indigenous consultations to determine the preferred option to report back to the Minister of Energy and Mines by August 2025.

The IESO released its latest Reliability Outlook Report (July 2025-December 2026). It also published a third-party review of its planning and procurement processes, and its response to their recommendations.

The IESO Exemption Panel approved a number of amendments to exemptions to align existing exemptions with the renewed market rules.

Legislative and Regulatory

The Ontario Government introduced and passed Bill 5, Protect Ontario by Unleashing our Economy Act, 2025. The legislation enacts the Special Economic Zones Ac, 2025, which authorizes the designation of special economic zones through regulation. It also allows, through regulation, the exemption of designated projects or trusted proponents from the application of certain legislation, regulations, instruments, and by-laws.Bill 5 also included amendments to both the Electricity Act and the Ontario Energy Board Act, authorizing the government to impose geographic origin-based restrictions on the procurement of electricity and gas-related goods and services. These restrictions apply to the IESO, OPG, gas utilities, and electricity licensees (e.g. distributors, and transmitters) or their subsidiaries. The changes give the government broader control over procurement decisions through directives and regulations tied to the geographic origin of suppliers or services.

The Ontario Government also introduced Bill 40, Protect Ontario by Securing Affordable Energy for Generations Act, 2025. If passed, the bill would make several amendments to energy-related legislation, including:

  • Electricity Act. Adds new statutory purposes to promote economic growth and support the development of a hydrogen market and economy, and expands the IESO’s objectives to include economic growth. It would also permit, through regulation, certain electricity-related payments to be funded through legislative appropriations, and introduce new provisions restricting electricity distributors and transmitters from connecting certain load facilities unless connection requirements set by regulation are met.
  • Ontario Energy Board Act. Adds economic growth as a new statutory objective of the OEB in relation to electricity regulation. It would authorize the CEO to issue internal procedural policies and implement provisions related to new connection restrictions under the Electricity Act. The bill would also require the OEB to consider appropriated payments to transmitters in rate-setting, incorporate economic growth into the public interest test for leave to construct applications, and allow deferral and variance accounts for costs related to compliance with Bill 5, Protect Ontario by Unleashing our Economy Act, 2025.
  • Municipal Franchises Act. Removes the requirement for municipal elector approval before granting a utility the right to use or occupy municipal highways, allowing municipalities to do so through a by-law passed by council. It also expands the OEB’s authority to consider applications from municipalities or gas distributors to renew or extend rights not only to operate but also to construct, extend, or add to gas distribution works.

The Ontario Government announced that it has approved OPG’s plan to begin construction of the first of four SMRs at Darlington. OPG estimates the total cost for all four units at $20.9 billion.

The Minister of Energy and Mines announced that the Ontario government and OPG are working with the Taykwa Tagamou Nation and the Moose Cree First Nation to explore and advance two new hydroelectric generation stations in Northern Ontario: the Nine Mile Rapids Generating Station and the Grand Rapids Generating Station.

There were a number of new proposed or issued amendments to regulations, including:

  • Amendments to Ontario Regulation 429/04 under the Electricity Act and Ontario Regulation 53/05 under the Ontario Energy Board Act to align the regulatory framework with the IESO’s MRP.
  • Amendments to Ontario Regulation 429/04 under the Electricity Act to create a new framework allowing participants in the Industrial Conservation Initiative (ICI) program to enter into Corporate Power Purchase Agreements with eligible non-emitting generators located anywhere in Ontario, provided both parties are market participants, to help reduce a facility’s Global Adjustment charges.
  • Amendments to Ontario Regulation 328/03 under the Ontario Energy Board Act to expand the exemption from the leave to construct requirement for pipeline projects to include all relocation and reconstruction projects required by another person, provided certain conditions are met. Previously, the exemption was limited to projects required by a priority transit or road authority.
  • Amendments to Ontario Regulation 53/05 under the Ontario Energy Board Act expanded the scope of the Pickering B extension variance account to include costs related to preserving OPG’s ability to operate Pickering B following the refurbishment project, regardless of whether it proceeds.
  • Proposed amendments to Ontario Regulation 53/05 under the Ontario Energy Board Act to: i) establish a concurrent cost recovery mechanism allowing OPG to recover debt costs during the construction phase of the Darlington SMRs and Pickering Refurbishment; and ii) enable OPG to enter into commercial partnerships for equity in new SMRs built at Darlington, with the new entity remaining a prescribed generator under the regulation.
  • Proposed seperate amendments to Ontario Regulation 53/05 under the Ontario Energy Board Act to allow for the creation of a new variance account to record OPG’s pre-development expenses for new hydroelectric projects.

The Ontario Government also sought public feedback on actions it is considering with respect to several transmission projects. In each case, the Government proposes to declare the project a priority under section 96.1 of the Ontario Energy Board Act and, where it has not already done so (if applicable), designate Hydro One as the transmitter under section 26.7.1. The new transmission projects include:

The Associate Minister of Energy-Intensive Industries announced a number of new initiatives to support the hydrogen economy, including creating a new hydrogen interruptible rate pilot, exploring the regulation of hydrogen pipelines, and expanding the Hydrogen Innovation Fund.

Federal Government

The Federal Government introduced and passed Bill C-5, One Canadian Economy Act, which enacts the Building Canada Act. The Act allows the Federal Government to designate certain infrastructure and resource developments as national interest projects, streamlining their approval by consolidating all required federal authorizations into a single decision.

Canadian Nuclear Safety Commission (CNSC) announced its decision to issue a license to construct to OPG to construct its first SMR at Darlington.

Competition Bureau issued final guidelines regarding environmental claims, including the new greenwashing provisions that were added to the Competition Act in 2024.

Natural Resources Canada released Electric Utility Innovation Benefits: Lessons Learned from Government Programming Report.

Judicial

The Ontario Court of Appeal released its decision in Essex (County) v. Enbridge Gas Inc. upholding the Divisional Court’s decision overturning an OEB’s ruling that found a 1957 franchise agreement between Enbridge and the County had expired under the rule against perpetuities. The Court agreed that the OEB had misapplied the rule, focusing incorrectly on the duration of the agreement rather than whether the franchise rights had vested. The Court also held that the Divisional Court was not bound to follow its earlier decision which had been based on a misunderstanding of the rule against perpetuities. Lastly, it confirmed that the OEB lacked authority under section 10 of the Municipal Franchises Act to impose new franchise terms unless the existing agreement had expired or was about to expire.

In Telus Communications Inc. v. Federation of Canadian Municipalities, the Supreme Court of Canada held that telecom carriers do not have a statutory right to install 5G antennas on utility poles under the Telecommunications Act. The Supreme Court found that transmission line refers only to wireline infrastructure like cables, not antennas. As a result, access to poles for 5G antennas must be negotiated with pole owners, which include municipalities and electricity utilities.

What We Are Reading

Power Advisory’s weekly MRP review, NERC’s Interregional Transfer Capability Study Canadian Analysis Final Report and 2025 Summer Reliability Assessment, Clean Air Task Force’s Beyond LCOE: A Systems-Oriented Perspective for Evaluating Electricity Decarbonization Pathways, Lazard’s 2025 LCOE+ Report, and Professor Daly’s 2024 Developments in Administrative Law Relevent to Energy Law and Regulation.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

Categories
Uncategorized

Energy Regulatory Update (Q1, 2025)

We’re pleased to share the Q1, 2025 edition of the Shepherd Rubenstein Energy Regulatory Update, our summary of key developments in Ontario’s energy sector between January and March (and the first few days of April). This quarter was marked by heightened uncertainty caused by the ongoing trade dispute with the United States. The Ontario provincial election led to a temporary pause in many regulatory initiatives, while the recent launch of the federal election campaign has added further complexity to the evolving energy policy landscape heading into Q2.

Trade War

The escalating trade war between Canada and the United States has had direct implications for Ontario’s energy sector.

In January, the Ontario government introduced its Fortress Am-Can plan, aimed at promoting energy security and economic growth on both sides of the Canada-U.S. border. In early February, President Trump issued an Executive Order imposing tariffs on all Canadian imports (10% on energy and 25% on all other goods). These tariffs were subsequently paused for 30 days.

In anticipation of the pause expiring, the New York Independent System Operator (NYISO), which is interconnected with Ontario, filed a tariff revision with the Federal Energy Regulatory Commission (FERC). The filing proposed a mechanism to recover the costs of potential tariffs on Canadian electricity imports, if applicable. NYISO’s view is that under existing legal precedent, tariffs apply only to tangible goods, and therefore electricity, as an intangible product, should fall outside the scope of the Executive Order.

On March 4th, the United States implemented an Executive Order imposing the previously paused tariffs. The order was later amended to temporarily exempt goods compliant with United States-Mexico-Canada Agreement (USMCA/CUSMA). In response, the Ontario Government announced on March 10th that it would apply a 25% electricity surcharge on exports to the United States. This measure was implemented by filing Ontario Regulation 25/25 under the Electricity Act and through a letter directing the IESO to urgently amend the Market Rules to apply a surcharge of $10 per megawatt-hour, reflecting approximately 25% of the average value of electricity exports. That day, the IESO implemented an urgent Market Rule amendment requiring it to administer a charge on all export transactions to the United States, based on the amount specified in a request from the Minister of Energy and Electrification. The following day, following discussions with the United States government, the Minister directed the IESO to suspend the surcharge by setting the charge amount to zero.

In a separate February announcement, the United States imposed a 25% tariff on steel and aluminum imports, effective in mid-March. Later in March, it also announced a 25% tariff on automobile imports and parts, effective April 3rd (there is an ability for importers to exempt United States content to reduce the tariff on CUSMA originating vehicles and parts). Both measures are expected to disproportionately impact Ontario. In response to the broad-based tariff announcement and the specific tariffs on steel and aluminum, the Federal Government announced retaliatory tariffs on a range of imported products. It also launched a consultation on potential further retaliatory tariffs on imported goods from the United States, which include several energy-related items such as electricity transformers, insulators, wiring, and steel and plastic pipes used in natural gas infrastructure.

On April 2nd, the United States announced differentiated tariffs on countries around the world, with a minimum rate set at 10%. These new tariffs will not apply to Canadian (and Mexican) imports that are CUSMA-compliant, in accordance with previous Executive Orders. Non-compliant goods will be subject to a 25% rate, and a 10% rate will apply to energy and potash. On April 3rd, in retaliation for the implementation of previously announced auto tariffs, the Federal Government announced a 25% counter-tariff on United States made cars not compliant with CUSMA

Ontario Energy Board

The OEB issued a number of notable decisions over the last few months, including:

Notices of Amendments to various codes were issued, including:

The OEB announced a consultation on Distribution System Operator (DSO) capabilities, with a focus on ensuring that their introduction delivers value for customers. It also announced a consultation to support a review and evaluation of its Integrated Resource Planning Framework for Enbridge Gas.

As part of the Distributed Energy Resources (DER) Connection Review initiative, the OEB revised the Distributed Energy Resources Connection Procedures (DERCP). The revisions aimed to address customer concerns, enhance access, standardize connection practices, and simplify processes to reduce connection costs and timelines. OEB Staff also issued a letter reminding electricity distributors of their obligations under the Electric Vehicle Charging Connection Procedures (EVCCP).

A letter was issued providing guidance to electricity distributors in incorporating innovation-related proposals in rate applications. The OEB also updated its performance standards for Mergers, Acquisitions Amalgamations and Divestitures (MAADs) applications.

In January, the OEB released its Draft Report for comment on its proposed Electric Vehicle Charging Rate (EVC Rate), incorporating feedback received on its earlier proposal last year. At the end of March, the OEB released the Final Report, incorporating feedback received on the Draft Report.

As part of its Reliability and Power Quality Review (RPQR), the OEB announced the introduction of reliability performance targets. Developed in consultation with the RPQR Working Group, these targets will be included in electricity distributors’ performance scorecards beginning with applications for rates effective in 2027.

The OEB issued a letter, in conjunction with the release of the OEB Staff report, reviewing Enbridge Gas’s 2024 Annual Update to its natural gas supply plan. As part of the letter, the OEB adopted a process change for the consideration of future gas supply plans and accepted the OEB Staff recommendation that the next five-year gas supply plan (to be filed in 2025) be adjudicated by a panel of commissioners, with subsequent annual updates to continue to be considered through stakeholder consultation.

A generic deferral and variance account (DVA) for electricity distributors was established to record the incremental revenue requirement impacts resulting from reductions in forecasted customer capital contributions embedded in distribution rates. These reductions arise from previously implemented changes to the connection and revenue horizon for housing developments.

Assurances of Voluntary Compliance (AVCs) were entered into with Orangeville Hydro Limited regarding non-compliance related to Class A Global Adjustment under-billing and loss adjustment errors. As part of accepting the AVC, the OEB directed the IESO, notwithstanding the limitation period, to refund Orangeville Hydro for the billing error. AVCs were also entered into with GC Project and Atlantic Packing Products for operating in the electricity market without a retailer or wholesaler license, respectively.  

The OEB released its Intervenors and Regulatory Efficiency report, which was sent to the Minister of Energy and Electrification. The report was developed in response to the 2023 Letter of Direction to the OEB, and its Action Plan is referenced in the Minister’s 2024 Letter of Direction.

At the beginning of April, the OEB launched two consultations to inform ratemaking for electricity distributors. The first is a review of the use of total cost benchmarking in assessing the overall cost performance of electricity distributors, which is used as part of the price cap index X-factor. The second is a review of electricity distributor spending patterns.

Independent Electricity System Operator

In early January, the Ontario Government announced a new 2025-2036 Energy Efficiency Framework (Enhanced DSM (eDSM) Framework) to be launched by the IESO. The new 12-year framework budgeted and approved through a procurement directive will cost a total of $10.9 billion, with each 3-year eDSM plan costing $3.2 billion. The framework includes 12 continuing or expanding programs and 2 new programs, the Home Renovation Savings Program, and Small Business Peak Perks. Notably, the framework features an expanded Local Initiative Program and a requirement to deliver residential and low-income programs with Enbridge Gas through a single delivery window. The Ontario Government also directed the IESO to implement beneficial electrification measures aimed at promoting electrification and the use of electricity to reduce emissions.

The Ontario government announced that it is advancing pre-development work for the proposed Ontario Pumped Storage Project (a partnership between TC Energy and the Saugeen Ojibway Nation). The Minister of Energy and Electrification issued a directive to the IESO to finalize and enter into an agreement with TC Energy to recover expenses associated with the pre-development work.

The IESO released the April 2025 to September 2026 Reliability Outlook.

Legislative and Regulatory

The Ontario Government approved Ontario Power Generation’s (OPG) plan to proceed with the next phase (project definition) of the refinement of the Pickering Nuclear Generating Station’s “B” units. The Minister of Energy and Electrification also proposed amendments to Ontario Regulation 53/05 under the Ontario Energy Board Act, clarifying the scope of what can be recorded in the Pickering B Extension Variance Account.

The Ontario Government also asked OPG to explore opportunities for new nuclear generation at its Wesleyville site, following expressions of interest from the Municipality of Port Hope and the Williams Treaties First Nations (WTFN). It also expressed support for OPG’s $2 billion plan to refurbish and expand hydroelectric generating stations across Northern Ontario.

The Ministry of Energy and Electrification proposed an amendment to Ontario Regulation 735/20, under the Electricity Act, to use the proceeds from the Future Clean Electricity Fund (where proceeds of the Clean Energy Credits from OPG and the IESO are held) to offset the Global Adjustment costs arising from non-emitting electricity generation approved by the IESO.

With the swearing in of the new cabinet in March, the Ministry of Energy and Electrification was renamed the Ministry of Energy and Mines to reflect the expanded responsibilities.

The Associate Minister of Energy-Intensive Industries announced a new round of funding of up to $3M from the Hydrogen Innovation Fund.

Federal Government

The Federal Government announced $55 million of funding from its Environment and Climate Change Canada’s Future Electricity Fund (FEF) to OPG to support the predevelopment activities for the next three proposed small modular reactors (SMR) at its Darlington site.

In late March, the Federal Government effectively eliminated the consumer Federal Carbon Charge through a regulation amending Schedule 2 of the Greenhouse Gas Pollution Pricing Act and the Fuel Charge Regulation, setting the charge amount to zero after March 31, 2025. Subsequently, the OEB approved applications by both Enbridge Gas and EPCOR to reflect the change in rates charged for customer commodity consumption as of April 1st.

The Federal Government also announced the doubling of the indigenous Loan Guarantee Program from $5 to $10 billion.

The Canadian Nuclear Safety Commission (CNSC) issued its Record of Decision of its recent approval to extend the operation of Pickering Nuclear Generating Station Units 5 to 8 until the end of 2026.

Judicial

In Kebaowek First Nation v. Canadian Nuclear Laboratories, the Federal Court granted, in part, the Kebaowek First Nation’s application for judicial review of a CNSC decision authorizing the construction of a Near Surface Disposal Facility (NSDF) at Chalk River. The Federal Court found that the Commission erred in law by concluding it lacked jurisdiction to consider the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and its implementing legislation, in assessing the Crown’s duty to consult and accommodate. It held that the UNDRIP is now part of Canadian law and must inform the interpretation of section 35 of the Constitution Act, 1982. The Federal Court emphasized that while UNDRIP does not create new rights or a veto, it is an important interpretive lens for reconciliation and meaningful consultation.

The Alberta Court of Appeal in FortisAlberta Inc v Alberta Utilities Commission, granted permission to appeal the Alberta Utilities Commission’s (AUC) decision establishing the third-generation performance-based regulation (PBR3) plan for 2024–2028. FortisAlberta, ENMAX, and ATCO argued that the AUC’s PBR3 framework denied them a reasonable opportunity to recover prudent capital costs. The Court of Appeal found the utilities raised serious questions of law regarding the compatibility of cost recovery obligations with a PBR model that deliberately de-links rates from costs under section 122 of the Electric Utilities Act. FortisAlberta also raised a distinct issue regarding the Commission’s failure to account for its unique circumstances in applying a stretch factor. Given the importance of these questions to Alberta’s utility regulation framework, the Court of Appeal concluded they were of significant public and industry-wide importance. Despite important differences between the Alberta’s Electric Utilities Act and the Ontario Energy Board Act, this is still a case to watch

Other

The Town of Essex announced that it has decided to sell its shares in E.L.K. Energy, along with a subsidiary, to the ENWIN Group of Companies (which includes ENWIN Utilities Ltd.), owned by the City of Windsor.   

Firm News

Both Jay and Mark were recognized in the latest edition of Canadian Legal Lexpert Directory.

Mark will be co-chairing the Ontario Bar Association’s Natural Resources and Energy Law Section’s Recent Developments in Energy Regulation program on April 24th.

What We Are Reading

Power Advisory’s Impact of Tariffs on Electricity Exports from Canada to the United States analysis, Positive Energy’s Energy Projects and Net Zero by 2050: Can We Build Enough Fast Enough Report, the Duke University’ Nicholas Institute for Energy, Environment & Sustainability’s Rethinking Load Growth Assessing the Potential for Integration of Large Flexible Loads in US Power Systems whitepaper, and Professor Schaufele’s article Demand and Oversight in Ontario’s Hybrid Electricity Market.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

Categories
SR Update

Energy Regulatory Update (Q4, 2024)

Happy New Year! We’re excited to bring you the latest edition of the Shepherd Rubenstein Energy Regulatory Update, a comprehensive quarterly summary of the incredibly busy period in Ontario’s energy sector. This issue highlights the flurry of regulatory activity and significant developments from October to December (and the first few days of January).

If you missed it, don’t forget to explore our special 2024 Year in Review edition, where we reflect on the major trends and milestones that shaped a dynamic and fast-paced year for energy policy and regulation in Ontario.

Ontario Energy Board

The OEB issued several notable decisions over the last few months, including:

In late December, the Minister of Energy and Electrification issued a new Letter of Direction to the Chair of the OEB for the upcoming year. The Letter of Direction sets out the Minister’s expectations and priorities for the OEB. These include, among others:

  • Providing input on the province’s Integrated Energy Plan (as well as plan implementation).
  • Implementing of the Keeping Energy Costs Down Act.
  • Considering how the ‘beneficiary pays’ principle can best be modified or applied to ensure:
    i) transmission/distribution infrastructure decisions account for probable future users, early and later beneficiaries, and other ratepayers, ii) utilities and their shareholders are kept whole, and iii) the potential for wasted costs or under-builds is minimized to protect ratepayers.
  • Work related to conservation and demand management, including: i) collaborating with the IESO and Enbridge to deliver a customer-focused, one-window platform for energy efficiency programs, ii) proposing an appropriate cost-sharing mechanism between the Global Adjustment and distribution rates, to fund the development and operation of new energy efficiency programs that provide both system and local distribution benefits, and iii) reducing barriers to LDC energy efficiency program activities.
  • Advancing work on electricity distributor reliability and resilience, non-wires alternatives, and regulatory efficiency.

The Minister of Energy and Electrification endorsed the recommendations of the OEB’s Report on System Expansion for Housing Developments. The OEB began implementing the most significant recommendation: extending the maximum connection horizon for housing developments from 5 to 15 years, and the revenue horizon for residential connections from 25 to 40 years. This was accomplished through the issuance of a Notice of Proposal to Amend the Distribution System Code (DSC), followed by a Final Notice incorporating stakeholder comments. The OEB also initiated a consultation and established an advisory group to develop a cost allocation model intended to facilitate large developments with multiple customers, or developers requiring system expansions. Additionally, OEB staff issued a Bulletin outlining expectations for distributors regarding the timely connection of new load customers.

The OEB initiated a consultation on Advancing Performance-Based Rate Regulation. In the short term, this consultation will explore adding performance incentives and mandates, while in the long term, it will consider more fundamental changes to the rate-setting approach. As part of the consultation, the OEB released a report to the Minister of Energy and Electrification on Utility Remuneration.

In response to the then Minister of Energy’s 2023 Letter of Direction requesting clear guidance for distributors on the need for publicly available electricity distribution capacity information, the OEB announced the Phase 1 implementation of capacity mapping, to be completed by March 2025. Additionally, OEB Staff issued a Bulletin regarding distributor obligations to provide access to specific forms and information related to the connection of DERs to their systems.

The OEB made progress and completed work as part of its initiatives related to electricity distribution sector resilience and responsiveness, including:

The OEB issued the 2025 Cost of Capital Parameters. However, as a result of the ongoing Generic Hearing on Cost of Capital, they were set on an interim basis. The OEB also issued preliminary 2025 Unconfirmed Transmission Rates (UTRs).

As part of its Review of the Consumer Protection Framework for Customers of Unit Sub-Meter Providers, undertaken in response to the 2022 Auditor General Report, the OEB released its Final Report and issued a Notice of Proposal to Amend the Unit Sub-Metering Code to increase consumer awareness.

The OEB held its annual Policy Day, and both the CEO and Chief Commissioner released their Mid-Year Report.

To help inform the assessment of Enbridge’s next gas DSM program application (filed in late November), the OEB released its 2024 Natural Gas Achievable Potential Study, prepared by Guidehouse.

The OEB issued an updated version of its Ontario Cyber Security Standard that requires distributors and transmitters to complete periodic independent cyber security assessments.

In early January 2025, after considering stakeholder feedback on its proposal for an Electric Vehicle Charging (EVC) Rate, the OEB issued a draft report on it for comment.

Independent Electricity System Operator

In October, the IESO released updated electricity demand forecasts as part of its upcoming 2025 APO. The IESO now forecasts that electricity demand will grow by 2.2% annually, resulting in a 75% increase by 2050. Medium-term peak capacity projections were also adjusted upward, with summer and winter peaks increasing by 700 MW and 900 MW, respectively. By 2025, peak demand is expected to rise by 50–60% compared to previous forecasts for the same year. The IESO attributes these upward revisions to increased electrification in the commercial sector, growth in data centers, and the expansion of EV production and supply chains.

With respect to its procurement activities, the IESO continued consultations regarding the planned Long-Term 2 RFP (LT2 RFP). In mid-December, the Minister of Energy and Electrification issued a procurement directive that, among other things, directed the IESO to proceed with the LT2 RFP using a multiple-window approach. This approach targets a total of 14 TWh through the energy stream and 1,600 MW through the capacity stream. The IESO is targeting 3 TWh of energy and 500 MW of capacity as part of its first window, with a submission deadline in Q3 2025. The Minister also announced an increase in the broader procurement capacity target, raising it from 5,000 MW to 7,500 MW in response to updated demand forecasts included in the upcoming 2025 APO. Additionally, the IESO was directed to report back by the end of April with options for procuring long-lead-time resources, as well as a program to re-contract existing small-scale, distribution-connected generation and acquire new resources. The IESO also completed its annual Capacity Auction, procuring 2,122 MW of capacity for summer 2025 and 1,525 MW for winter 2024/2025.

The IESO Board of Directors approved the final alignment batch of market rule amendments to implement the Market Renewal Program (MRP). However, several non-quick-start natural gas generators filed an application with the OEB seeking a review of these MRP market rule amendments. The Application requests that the amendments be revoked and sent back to the IESO for reconsideration. The statutory deadline for the OEB to decide on the Application is March 6, 2025.

In October, the Minister of Energy and Electrification wrote to the IESO regarding work to ensure a smooth transition from the current 2021-2024 CDM Framework to the new Energy Efficiency Framework, which was under development. The IESO also released the 2023 CDM Results.

The IESO released both a new External Relations Engagement Framework and its first Indigenous Engagement Framework.

The IESO Exemption Panel approved an exemption request from Algoma Steel for sections 2.4A of Chapter 9 of the Market Rules, allowing its new electric arc furnace non-dispatchable load facilities to be settled on a net basis when generation from a self-scheduling co-generation facility is used to offset its load. The Exemption Panel also approved an exemption reconsideration application from Gerdau Steel, regarding several Market Rules due to the variable consumption patterns of its electric arc furnaces.

A settlement agreement was reached between the IESO and Hydro Ottawa regarding the utility’s failure to comply with certain meter-related obligations under the Market Rules.

The January 2025 to June 2026 Reliability Outlook was released.

In early January 2025, the Ontario Government announced a new 2025-2036 Energy Efficiency Framework (Enhanced DSM (eDSM) Framework) to be launched by the IESO. The new 12-year framework budgeted and approved through a procurement directive, will cost a total of $10.9 billion, with each 3-year eDSM plan costing $3.2 billion. The framework includes 12 continuing or expanding programs and 2 new programs, the Home Renovation Savings Program and Small Business Peak Perks. Notably, the framework features an expanded Local Initiative Program and a requirement to deliver residential and low-income programs with Enbridge Gas through a single delivery window. The Ontario Government also directed the IESO to implement beneficial electrification measures to promote electrification and the use of electricity to reduce emissions.

Legislative and Regulatory

The Minister of Energy and Electrification released the government’s energy vision document, Ontario’s Affordable Energy Future: The Pressing Case for More Power, which highlights priorities across three themes: planning for growth, affordable and reliable energy, and becoming an energy superpower. These priorities aim to achieve the vision of an affordable, reliable, and clean energy economy. The Minister also announced the intention to create Ontario’s first integrated energy resource plan, which is set to be developed and released in 2025.

The Ontario Government also introduced and passed Bill 214, the Affordable Energy Act, 2024. The legislation:

Concurrently, the Ministry of Energy and Electrification undertook a consultation regarding its new authority under Bill 214, to amend the DSC and TSC for potential changes to cost responsibility for certain electricity system connection infrastructure in high-growth areas.

The Ministry of Energy and Electrification also conducted several significant public consultations on the following topics and policy areas:

The Ontario Government issued a directive declaring the planned transmission line from Wawa TS to Porcupine TS as a priority project and designating Hydro One as the transmitter. They also announced that it had asked OPG to begin discussions with Indigenous, community, and municipal leaders regarding the potential use of its existing sites (Wesleyville, Nanticoke, and Lambton) for new generation facilities.

The Ministry of Energy and Electrification proposed amendments to Ontario Regulation 328/03 under the Ontario Energy Board Act, broadening the circumstances in which the OEB can determine that leave to construct is not required for pipeline relocation or reconstruction. This includes projects supporting priority transit initiatives and projects by road authorities, provided the remaining conditions set out in section 3 of the regulation are met.

As part of its 2024 Ontario Economic Outlook and Fiscal Review, the Ontario Government announced measures to incent distributor consolidation. It will extend the municipal electricity utilities Transfer Tax reduction and the elimination of capital gains arising from the departure tax to the end of 2028. As part of this extension, they also proposed expanding the eligibility for the zero Transfer Tax rate to all MEUs, regardless of size (currently limited to those with fewer than 30,000 customers). The changes were implemented through amending Ontario Regulations 124/99 and 162/01.

The Ontario Government also introduced Bill 228, the Resource Management and Safety Act, 2024. The legislation would enact a new Geologic Carbon Storage Act, 2024, that would enable regulation of commercial-scale carbon storage.

Federal Government

The Federal Government released its Clean Electricity Strategy, outlining current and planned actions to support a decarbonized and expanded electricity grid. The Wah-ila-toos Indigenous Council also released its final report.

The Ministers of Environment and Climate Change Canada issued the final Clean Electricity Regulation (CER), which included several significant changes. However, the regulations do not appear to address all the concerns previously raised by the IESO regarding their implications for Ontario. Before the CER was finalized, the Minister of Energy and Electrification sent a letter to the relevant federal ministers. The letter cited the IESO’s analyses, which indicated that the regulations would impose steep costs on Ontario ratepayers for the necessary replacement generation and transmission infrastructure.

As part of the Fall Economic Statement, the Federal Government announced the launch of the Canada Indigenous Loan Guarantee Corporation. It also announced that it will soon introduce legislation to deliver the previously announced Clean Electricity Investment Tax Credit, which will be retroactive to April 16, 2024, for projects that did not begin construction before March 28, 2023. For provincial and territorial Crown corporations, access to the tax credit will be available by June 30, 2025, provided they, i) publicly commit to publishing an energy roadmap to achieve net-zero emissions by 2050, inclusive of all energy sources, by the end of 2026, and, ii) publicly request that provincial and territorial Crown corporations pass on the benefits of the Clean Electricity Investment Tax Credit to electricity ratepayers in their province or territory. The Federal Government is also exploring changes to the threshold in the Income Tax Act that currently limits municipally owned utility corporations from attracting more than 10 percent private sector ownership.

The Nuclear Waste Management Organization (NWMO) announced its selection of the Township of Ignace and the Wabigoon Lake Ojibway Nation as the site for Canada’s deep geological repository for used nuclear fuel.

The Canadian Nuclear Safety Commission (CNSC) approved OPG’s application to operate Pickering units 5 to 8 until the end of 2026.

Judicial

The Ontario Court of Appeal granted leave to appeal the Divisional Court’s 2022 decision in West Whitby Landowners Group Inc. v. Elexicon Energy Inc., which concerned the availability of judicial review of an OEB opinion on whether a specific project was primarily an expansion or enhancement under the DSC, and the ability to challenge the OEB’s assessment of a complaint. In granting leave to appeal, the Court of Appeal commented that “there is no secret that both the federal and provincial governments are pursuing polices to promote much greater use of electricity in the economy” and the “Ontario government is pursuing an aggressive policy to support the construction of more residential accommodation, including subdivision project.”“ It found that on that basis “the question of whether some decisions of the state actor responsible for regulating the allocation of costs associated with the greater use of electricity are immune from judicial review is one of great public importance.”

Other

Hydro One announced that it (via Hydro One Networks Inc.) has entered into an agreement to purchase the respective interests of OMERS (via OMERS Infrastructure Management Inc.) and Enbridge Inc. (via Enbridge Transmission Holdings Inc.) in the East-West Tie LP,  who own and operate the East-West Tie Line.

The North American Electricity Reliability Corporation (NERC) released its 2024 Long-Term reliability Assessment.

What We Are Reading

Clean Prosperity’s Powering Up: Solutions for Electricity Distribution Finance in Ontario report, Pollution Probe’s Achieving Reliability in a Future Ontario Power System Action Plan (and the companion Power Advisory Net Zero Reliability Initiative Report), Professor Schaufele’s article How Confident Should We Be in Ontario’s Electricity Demand Forecast, and Power Advisory’s From Small to Mighty: Unlocking DERs to Meet Ontario’s Electricity Needs report.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

Click here for a pdf version.

Categories
SR Update

2024 Energy Regulatory Year in Review

Happy Holidays! It has been an eventful year for Ontario’s energy sector. With growing demand, new resource procurements, the release of a highly anticipated expert panel report, a government vision document, two major pieces of legislation, and a wave of new policies, consultations, and regulatory decisions, have brought significant change to energy regulation and policy.

As the year winds down, we’re excited to share the key themes and regulatory developments that, in our view, shaped 2024 in this special Year in Review edition of the Shepherd Rubenstein Energy Regulatory Update.

1. Increasing Demand

Almost all the key themes discussed below are fundamentally driven by the forecast increase in electricity demand in Ontario, spurred by electrification, population growth, and commercial load expansion.

In April, the IESO released its 2024 Annual Planning Outlook (APO), forecasting electricity demand to grow by approximately 2% annually, culminating in a 60% increase by 2050. The 2024 APO also indicated a shift from summer-peaking to dual-peaking by 2030, alongside a growing capacity deficit expected to reach approximately 23 GW by 2050.

Those forecasts were revised in October when the IESO released updated forecasts as part of its upcoming 2025 APO. The IESO now forecasts electricity demand will grow by 2.2% annually, resulting in a 75% increase by 2050. Medium-term peak capacity projections were also adjusted upward, with summer and winter peaks increasing by 700 MW and 900 MW, respectively. By 2025, peak demand is expected to rise by 50–60% compared to previous forecasts for the same year. The IESO attributes these upward revisions to increased electrification in the commercial sector, growth in data centers, and the expansion of EV production and supply chains.

2. Resource Procurement

The significant resource procurement activity that began in 2023 intensified in 2024.

As part of the first phase of its Resource Adequacy Framework, the IESO announced the results of its Long-Term 1 RFP (LT1 RFP) procurement process, targeting capacity between 2026 and 2028. The IESO procured 1,784 MW of storage capacity at a weighted average price of $673.32/MW (per business day) and 411 MW of non-storage capacity (almost exclusively natural gas generation).

The IESO engaged stakeholders on its planned Long-Term 2 RFP (LT2 RFP), which will feature both energy and capacity streams, as well as a Long Lead Time (LLT) resources stream. The LT2 RFP energy stream will use the Enhanced Power Purchase Agreement (E-PPA) revenue model. To inform the design of the LLT procurement, the IESO launched a Request for Information (RFI) focused on long lead time resources, specifically long-duration storage and hydroelectric generation. Recognizing the significant impact of the LT2 RFP on potential projects, the then Minister of Energy and the Minister of Agriculture, Food, and Rural Affairs jointly wrote to the IESO outlining policy considerations for energy projects on agricultural land. The Mid-Term 2 (MT2) RFP, targeting existing resources, was accelerated to precede the LT2 RFP, with submissions due in early January 2025.

In mid-December, the Minister of Energy and Electrification issued a procurement directive, that among other things, directs the IESO to move forward with the LT2 RFP with a multiple-window approach, targeting a total of 14 TWh through the energy stream and 1,600 MW through the capacity stream. The IESO is targeting 3 TWh of energy and 500 MW of capacity as part of its first window, with a submission deadline in Q3, 2025.

The Minister also announced an increase in the broader procurement capacity target, raising it from 5,000 MW to 7,500 MW, in response to updated demand forecasts as part of the upcoming 2025 APO. Additionally, the Minister directed the IESO to report back by the end of April with options for procuring long-lead time resources, as well as a program to re-contract existing small-scale distribution-connected generation and acquire new resources.

The IESO is still assessing two pump storage projects in Meaford (TC Energy and Saugeen Ojibway Nation) and Marmora (OPG and Northland Power), which were previously deemed less favorable than other alternatives. In January, the then Minister of Energy directed the IESO to collaborate with other ministries and project proponents to evaluate the broader social and economic benefits of these projects. The Minister also requested the Ministry of Energy to work with the OEB and project proponents on cost recovery mechanisms for his consideration.

Additionally, the IESO was directed to extend the contracts of the Atikokan and Hornepayne biomass generating stations.

Hydroelectric generation also saw notable developments. In addition to the IESO RFI, the Small Hydro Program was modified to allow the aggregation of contracts. At the Minister’s request, the IESO began engaging stakeholders to design a Northern Hydro Program (NHP), focused on re-contacting large existing hydroelectric facilities. The Minister of Energy and Electrification also announced the Government’s support for Ontario Power Generation’s (OPG) plans to refurbish the Sir Adam Beck, R.H. Saunders, and several other Eastern Ontario hydroelectric stations.

3. Planning To Do Integrated Planning

This year may be remembered as the year of planning for integrated planning.

It began with the release of the Electrification and Energy Transition Panel’s (EETP) final report, Ontario’s Clean Energy Opportunity. This comprehensive report outlines a recommended path for Ontario’s transition to a clean economy, guided by seven key principles. It also includes 29 specific recommendations across five areas: planning for electrification and the energy transition, governance and accountability, true partnerships with Indigenous partners, innovation and economic development, and consumer, citizen, and community perspectives.

In the fall, the Government released its energy vision document, Ontario’s Affordable Energy Future: The Pressing Case for More Power, which highlights priorities across three themes: planning for growth, affordable and reliable energy, and becoming an energy superpower, to achieve its vision of an affordable, reliable, and clean energy economy.

The vision document was followed up by the Government’s introduction and passage of Bill 214, the Affordable Energy Act. This legislation amends the Electricity Act, creating a legislative framework for the proposed integrated energy plan and outlining its goals and objectives. Simultaneously, the Minister of Energy and Electrification launched a consultation process for the integrated energy plan, expected to be released in early 2025.

A component of an integrated energy plan is conservation. The IESO was tasked with preparing a new electricity efficiency framework that is more enduring and has a longer timeframe than previous models. The Ministry of Energy and Electrification conduced a consultation on the framework and its delivery model, and then issued a procurement directive approving an Enhanced DSM (eDSM) Framework which will begin in 2025 and run through 2036, and have a budget of $10.9B. The initial 3-year eDSM plan will have a budget of $3.2B. Bill 214 also includes amendments to the Electricity Act that authorize the IESO to administer programs supporting beneficial electrification, aimed at promoting electrification and reducing emissions. Concurrently, the Ministry launched consultations on a proposed beneficial electrification program designed to coordinate with energy efficiency programming. In terms of natural gas conservation, the OEB released its Achievable Potential Study, and Enbridge has filed its proposed 2026-2030 demand-side management plan.

The Federal Government has launched its Clean Electricity Strategy, outlining current and planned actions to support a decarbonized and expanded electricity grid.

4. Role of Natural Gas

The Ontario Government’s response to the OEB’s Phase 1 Decision in Enbridge’s 2024-2028 rate application, as well as the broader question of the role of natural gas in the Ontario energy system, was a major focus of the energy regulatory and policy discussions this year.

Just before the 2023 holidays, the OEB released its Phase 1 Decision. As part of that complex decision, the OEB ordered (with one commissioner dissenting) that, beginning in 2025, all new low volume connecting customers would bear their connection costs upfront. Unhappy with the decision to set the customer connection revenue horizon to zero, on the grounds that it would increase the costs of constructing new homes, the then Minister of Energy announced the day after the decision was released, that the Government would use its authority to pause the decision and introduce legislation to reverse it. Shortly thereafter, in January, Enbridge filed both a motion to review and a notice of appeal regarding the Phase 1 Decision, including with respect to other aspects.

In February, the Government followed through on its promise, introducing and later passing Bill 165, the Keeping Energy Costs Down Act, 2024, which overturned the OEB’s determination on the revenue horizon issue. Among other provisions, authorized the Government to regulate the revenue horizon used by the OEB when setting natural gas distribution rates, at least until the earlier of January 1, 2029, or a generic hearing, which Bill 165 gave the Government authority to mandate. After the legislation received royal assent, the Government issued a regulation maintaining the status quo revenue horizon of 40 years for small volume customers and 20 years for others.

Bill 165 also authorized the Minister to issue directives requiring the OEB, in considering leave to construct applications for natural gas transmission or distribution/transmission pipelines, to mandate that all customers bear the full cost of the line without requiring the payment of any capital contribution or surcharge. The legislation included a specific provision addressing orders made between the introduction of the legislation and the end of 2024, clearly aimed at the Enbridge Panhandle Reinforcement Project proceeding, where several intervenors had raised the issue of capital contributions. Ultimately, the OEB approved the project and rejected (in a split decision) the imposition of capital contributions on new large connecting customers.

The legislation, along with other pronouncements, such as those included in the Affordable Energy Future vision document, has signaled the Ontario Government’s support for the natural gas system. It indicated that it would include a Natural Gas Policy Statement as part of its integrated energy plan to “provide clear direction on the role of natural gas in Ontario’s future energy system” which it is currently consulting on.

To speed up the regulatory process of certain natural gas infrastructure, the Government through Bill 165 and subsequent regulations, exempted hydrocarbon pipeline projects from the leave to construct requirements if the project cost is no more than $10 million and the OEB determines that the duty to consult has been adequately discharged. Additionally, the regulation limited when leave to construct approval from the OEB is required for the relocation or reconstruction of hydrocarbon lines and is consulting on further broadening these exemptions.

The OEB approved the Settlement Proposal in Phase 2 of Enbridge Gas’s 2024-2028 rate application, which represented a substantial agreement on the company’s 2025-2028 rate framework.

Regarding electricity generation, the IESO secured 410 MW of additional natural gas generation as part of the LT1 RFP. The Ontario Government has also pushed back against the Federal Government’s draft Clean Energy Regulations (CER), which would impose significant restrictions on natural gas generation. Earlier this year, Environment and Climate Change Canada released a public update report on the draft CER. The report summarized feedback it had received and proposed changes for further comment. The IESO submitted comments on the draft CER, and in late November, the Minister of Energy and Electrification sent an additional letter to the relevant Federal Ministers. The letter cited IESO’s analyses indicating that the regulations would impose a steep cost on Ontario ratepayers for the necessary replacement generation and transmission infrastructure. In mid-December, the Environment and Climate Change Canada issued the final CER, which did include several significant changes. However, they do not appear address all the concerns the IESO had raised regarding the implications for Ontario.

5. Nuclear Renaissance

It has been another big year for nuclear.

The Ontario Government announced its support for OPG’s plan to proceed with the initiation phase of the refurbishment of the Pickering Nuclear Generating Station’s B units (5-8).

 Bruce Power filed its initial project description with the Impact Assessment Agency of Canada (IAAC) for Bruce C, marking the beginning of the federal impact assessment process. Earlier in the year, the then Minister of Energy issued a directive to the IESO to enter into a funding agreement with Bruce Power to support a portion of the IAAC process.

The Nuclear Waste Management Organization (NWMO) announced its selection of the Township of Ignace and the Wabigoon Lake Ojibway Nation as the site for Canada’s deep geological repository for used nuclear fuel.

The Canadian Nuclear Safety Commission (CNSC) determined that OPG’s existing environmental assessment approval for a new nuclear facility applies to its proposed Darlington Small Modular Reactor (SMR) project. The CNSC also began hearings on OPG’s application for a licence to construct the first SMR (BWRX-300) reactor. Additionally, the CNSC approved OPG’s application to operate Pickering units 5 to 8 until the end of 2026. Pickering Unit 1 was shut down earlier this fall, and Unit 4 is expected to be shut down by the end of the year.

In late November, the Ministry of Energy and Electrification announced that the Government had asked OPG to begin discussions with Indigenous, community, and municipal leaders regarding the potential use of its existing sites (Wesleyville, Nanticoke, and Lambton) for new generation facilities, including potentially for new nuclear.

Nuclear power is also expected to play a major role in the Ontario Government’s upcoming integrated energy plan. As part of Bill 214, the Government explicitly required that one of the plan’s goals and objectives is “the prioritization of nuclear power generation to meet future increases in the demand for electricity”.

6. Evolving Distribution Sector

New technologies, the energy transition, and electrification are driving an evolution in the distribution sector.

Each was front and center in Toronto Hydro’s 2025-2029 Custom IR applications, which resulted in an OEB approved comprehensive settlement.

The OEB continued its efforts to encourage the use of non-wires solutions (NWS) by distributors as cost-effective alternatives to traditional infrastructure investments. It issued its Non-Wires Solutions Guidelines for Electricity Distributors (NWS Guidelines), replacing the existing CDM Guidelines for electricity distributors. The new guidelines reflect developments since 2021 and acknowledge that NWS addressing system needs can include a broader range of solutions beyond traditional CDM. Additionally, the OEB finalized Phase 1 of its Benefit-Cost Analysis (BCA) Framework for Addressing Electricity System Needs. Starting with applications filed in 2026, the BCA Framework will apply to all electricity distribution capital investments greater than $2 million.

The OEB is also considering changes to its rate-setting framework, starting with distributors. In response to last year’s Letter of Direction, it submitted a report to the Minister of Energy and Electrification, concluding that utilities’ remuneration based on traditional capital infrastructure deployment remains the most cost-effective model. Following this report, the OEB launched its Advancing Performance-Based Rate Regulation consultation. In the short term, this consultation will explore adding performance incentives and mandates, with the long-term goal of considering more fundamental changes to the rate-setting approach. Additionally, the OEB initiated a review of its Incremental Capital Module (ICM) Policy.

As part of its broader Distribution Sector Resiliency, Responsiveness, and Cost Efficiency (DRRCE) initiative, the OEB launched its Vulnerability Assessment and System Hardening (VASH) project. The VASH project aims to incorporate climate resiliency into asset and investment planning, regularly assess system vulnerabilities during severe weather events, and prioritize value for customers when investing in resilience-focused system enhancements.

With the increased use of electric vehicles (EVs), the OEB finalized amendments to the Distribution System Code (DSC) to facilitate the connection of EV infrastructure. These changes included the creation of standardized Electric Vehicle Charging Connection Procedures and a requirement for distributors to include a separate index for EV connections in their Conditions of Service. OEB Staff also released a discussion paper for comment, proposing a reduced Retail Transmission Service Rate (RTSR) for public EV charging stations with low load factors.

To facilitate DER adoption, the OEB amended the DSC to enable electricity distributors to provide flexible hosting capacity arrangements and provided guidance for the phased implementation of new requirements for distributors to publish capacity information maps.

On the innovation front, the OEB updated its Innovation Handbook and approved, with modifications, Essex Powerlines’ request to establish a new deferral account for recording costs related to energy and capacity payments for participants in its PowerShare Distribution System Operator pilot project. However, the OEB also rejected Toronto Hydro’s proposed Innovation Fund citing a number of deficiencies. The IESO issued the final Evaluation Report for the York Region Non-Wires Alternatives Demonstration Project.

7. Indigenous Participation and Engagement

There was increased recognition of the importance of Indigenous economic participation and engagement in the energy sector.

A significant portion of the EETP’s Report focused on advancing meaningful Indigenous participation and partnerships in the energy sector, including several specific recommendations. The Affordable Energy Future vision document also highlighted the importance of Indigenous leadership and participation in energy planning. Similar emphasis was reflected in the work of the Federal Ministerial Working Group on Regulatory Efficiency for Clean Growth Projects, the Canada Electricity Advisory Council, and in the Federal Government’s Powering Canada’s Future: A Clean Electricity Strategy.

As part of the IESO’s development of a Transmission Selection Framework, it proposed requiring proponents to demonstrate Indigenous participation. The Ontario Government also announced that, as part of OPG’s discussions with Indigenous leaders regarding the potential for new generation facilities at three of its existing sites, it would include considerations for how those communities could be supported through equity participation.

There were high levels of Indigenous participation in the LT1 RFP, with 9 of the 10 successful storage projects involving at least 50% First Nations equity participation. LT2 RFP will similarly include rated criteria for projects with Indigenous participation.

In its 2024 Budget, the Federal Government announced up to $5 billion for a new Indigenous Loan Guarantee Program to support energy and natural resource projects. As part of the Fall Economic Statement, the Federal Government followed up with an announcement the launch of the Canada Indigenous Loan Guarantee Corporation. Barriers to Indigenous participation were also raised in the context of the OEB’s generic hearing on the cost of capital.

In terms of Indigenous engagement and consultation, the IESO issued its first Indigenous Engagement Framework. The OEB sought feedback from Indigenous communities and organizations, as well as natural gas utilities and other stakeholders, on proposed revisions to its Environmental Guidelines for the Location, Construction, and Operation of Hydrocarbon Projects and Facilities in Ontario regarding Indigenous consultation requirements. Additionally, the Federal Government’s 2024 Budget announced the establishment of a Crown Consultation Coordinator.

8. Intersection Between Energy and Housing Policy

Over the past year, the Ontario Government has implemented energy policy changes to advance its broader goals of increasing housing supply and enhancing affordability.

In response to a request included in the Minister of Energy’s 2023 Letter of Direction, the OEB undertook a consultation to review electricity distribution system expansion policies for housing developments, with a focus on connection and revenue horizons. Each of the resulting recommendations included in the OEB’s report was endorsed by the Minister of Energy and Electrification.

The OEB has begun implementing the most significant recommendation by issuing a Notice to Amend the Distribution System Code. This amendment would extend the maximum connection horizon for housing developments from 5 to 15 years, and extend the revenue horizon for residential connections from 25 to 40 years. Additionally, the OEB initiated a consultation process and established an advisory group to develop a cost allocation model. This model aims to allocate costs in cases where significant initial system expansion into a development area is required, and the associated costs are borne solely by the initial connecting customers.

As part of Bill 214, the Government gained new authority regarding the Transmission System Code (TSC) and the DSC. This includes the ability to issue regulations specifying amendments to the DSC or exempting entities from its application, particularly regarding cost allocation and cost recovery for new infrastructure as part of the distribution system. The Minister of Energy and Electrification’s consultation on these regulations also focused on addressing ‘first mover’ costs on the distribution system. It also examined the assurances distributors need to build certain facilities in anticipation of growth, even when not all capacity has confirmed customers.

9. Transmission

Not as high-profile as many other themes in 2024, but there were important regulatory developments throughout the year regarding the transmission system.

The OEB granted leave to construct Hydro One’s proposed Waasigan Transmission Line and St. Clair Transmission Line (Lambton TS to Chatham SS). The Ministry of Energy and Electrification declared the planned transmission line from Wawa TS to Porcupine TS a priority project and designating Hydro One as the transmitter.

There was significant focus on connection costs. The OEB launched a review of the connection-related sections of the Transmission System Code (TSC) and formed a working group. As part of Bill 214, the Government now has the authority to pass regulations amending the TSC, or exempting entities from its application concerning cost allocation and cost recovery for the construction, expansion, and reinforcement of the transmission system. The Minister of Energy and Electrification consulted on developing these regulations, which aim to reduce costs for ‘first movers’ and provide transmitters (and distributors) with the assurances needed to build certain connection infrastructure.

The OEB also handled several single-asset transmitter rate applications. It approved three settlement proposals (B2M LP, Niagara Reinforcement LP, and Chatham x Lakeshore LP), establishing a new 5-year revenue requirement framework for single-asset transmitters. Additionally, it approved a rate adjustment application brought by Upper Canada Transmission 2, which operates the East-West Tie Line. This approval included a $30 million disallowance related to project cost overruns, primarily due to the COVID-19 pandemic.

As part of implementing last year’s Powering Ontario’s Growth, the IESO completed its engagement to develop a Transmission Selection Framework in preparation for its required report to the Minister of Energy and Electrification in September. The IESO proposed that for certain projects it would conduct an RFP among qualified bidders. The successful proponent would be awarded a partial contract running until shortly after commercial operations begin. This partial contract would cover design, construction, and a fixed level of O&M costs, which would then be included in an OEB cost of service application. Additionally, some or all of the post-commercial revenue would be fixed via contract.

10. Market Renewal Program Implementation

We are now just months away from the scheduled implementation of the Market Renewal Program (MRP) in May 2025.

This past year, the Technical Panel unanimously recommended approval of the final alignment batch of market rule amendments to implement the MRP. This followed the IESO making several substantive changes to the market rules and manuals, including the establishment of a Market Power Mitigation Working Group. The market rules amendments were subsequently approved by the IESO Board of Directors.

The IESO has spent much of the year focusing on market participant readiness. The OEB has also prepared for the implementation of the MRP, issuing a letter outlining expected amendments to various codes, and provided draft accounting guidance related to commodity pass-through accounts.

However, the implementation schedule is now in doubt. In November, several non-quick start natural gas generators filed an application with the OEB seeking a review of the MRP market rule amendments. The application requests that the amendments be revoked and sent back to the IESO for reconsideration. The statutory deadline for the OEB to decide on the application is March 6, 2025.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

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SR Update

Energy Regulatory Update (Q3, 2024)

Welcome to the latest edition of the Shepherd Rubenstein Energy Regulatory Update, a quarterly round-up of the important developments in the Ontario energy sector. Below are some of the key regulatory happenings between July and September.

Ontario Energy Board

The OEB issued a number of notable decisions, including:

A consultation was launched to review and evaluate the Incremental Capital Module (ICM) Policy.

To reflect changes to policies and other guidance documents since its release, the OEB released an update to its Innovation Handbook.

The OEB held a stakeholder session to seek feedback on the implementation of two possible alternative pricing plans for Non-RPP Class B Customers. As part of its Transmission Connection Review, the OEB announced the members of working groups and an issues list.

Final amendments to the Distribution System Code (DSC) and Transmission System Code (TSC) were issued requiring utilities to comply with the new Ontario Cyber Security Standard.

The OEB issued updated Filing Guidelines for Ontario Power Generation payment amount application. They also issued new filing requirements of applications for exemptions from the requirement for leave to construct natural gas (and other hydrocarbon) pipelines contemplated under sections 90(2) and 95(2) of the OEB Act, and the newly amended Ontario Regulation 328/03.

The Market Surveillance Panel (MSP) delivered its State of Market 2023 Report.

The OEB issued a letter outlining several ongoing and new commitments to its data transparency initiatives, including among other open data releases, providing access to RRR data for electricity transmitters.

As part of preparing its report to the Minister of Energy and Electrification, which was delivered in September, the OEB held a stakeholder meeting in August on its Consumer Advocate and Cost Award Process Review to share preliminary findings and recommendations from its expert consultant and to seek feedback.

Seven more Assurances of Voluntary Compliance (AVC) were accepted from electricity distributors (Renfrew Hydro, Lakefront Utilities, Lakeland Power, London Hydro, PUC Distribution, Ottawa River Power, and InnPower Corporation) related to billing errors that resulted in the over-charging of customers through the fixed monthly service charge. Two AVCs were also accepted from electricity wholesalers for operating without a license (Norbord and Northern Tel LP).

Independent Electricity System Operator

During the last quarter, the IESO undertook further consultations on the development of its planned Long-Term 2 RFP (LT2 RFP). In late August, the Minister of Energy and Electrification wrote to the IESO requesting a report by late September on options to accelerate the final targets, timelines, and design elements for the LT2 RFP, with the goal of accelerating and concluding the procurement by the end of February, 2026. The Minister also sought options for procurement of resources requiring longer development lead times. As part of the letter, the Minister outlined expectations regarding additional policies that should be reflected in the IESO’s LT2 design, including, among others, that procurement should be technology-agnostic, require municipal support and access to Crown Land, consideration of rating criteria for new projects in certain Northern Ontario communities, and incentivizing the participation of Indigenous communities

The Minister also noted his support for the IESO’s proposed Enhanced Power Purchase Agreement (E-PPA) revenue model for energy projects, and expressed an expectation, that for capacity projects the contracts will be similar to those used in the LT1 RFP.

The IESO launched a Request for Information (RFI) focused on long lead time resources, specifically long duration energy storage and hydroelectric generation.

As expected, the IESO began consultations on a second Medium Term RFP (MT2-RFP) with an expected proposal deadline of January 2025. The MT2-RFP will have both a capacity and energy stream focused on reacquiring existing resources, whose contracts are ending no later than April, 2029.

The Technical Panel unanimously recommended approval of the final alignment batch of market rule amendments to implement the Market Renewal Program (MRP), This came after the IESO made a number of substantive changes to the market rules (and manuals), including establishing a Market Power Mitigation Working Group. The Technical Panel also recommended approval of market rule amendments related to the Capacity Auction. Those latter amendments were subsequently approved by the IESO’s Board of Directors.

The IESO completed stakeholder engagement on a proposed Transmission Selection Framework in preparation for its required report to the Minister of Energy and Electrification in September. The IESO’s proposed design is that for certain eligible projects, the IESO will undertake an RFQ of qualified transmitters to bid into an RFP. To be selected, a proponent will be required to demonstrate Indigenous participation. The selected proponent would be awarded a partial contract to run until a short period after commercial operations. The partial contract would include the design and construction, as well as a fixed level of O&M costs. The contract amounts would be required to be included in a cost of service application with the OEB, and some or all of the post-commercial operations revenue would be fixed via contract and incorporated into the Uniform Transmission Rates (UTRs).

The IESO released the York Region Non-Wires Alternative Demonstration Project Evaluation Final Report. The IESO also released the latest 18-month Reliability Outlook.

Legislative and Regulatory

The Ministry of Energy and Electrification proposed to declare the planned transmission line from Wawa TS to Porcupine TS as a priority project under section 96.1 of the Ontario Energy Board Act and to designate Hydro One as the transmitter.

Government of Ontario also:

Federal Government

The Government of Canada released its new Canada Green Buildings Strategy. Natural Resources Canada launched a Request For Proposal under its Zero Emission Vehicle Infrastructure Program (ZEVIP) to support development of EV chargers, including fast chargers across the country.

The Impact Assessment Agency of Canada sought feedback on a discussion paper regarding a five-year review of the Physical Activities Regulations (commonly referred to as the Project List) made under the Impact Assessment Act.

The Canadian Energy Regulator (CER) launched a review of its rules of practice and procedure. As part of the review, it issued a discussion paper and is seeking written feedback.

Judicial Decisions

In August, the Ontario Superior Court released its decision in West Whitby Landowners Group Inc. v. Elexicon Energy, dismissing an application as an abuse of process. The application was brought by a group of developers who had a dispute with Elexicon Energy regarding the provisions of an Offer to Connect agreement. They had previously challenged the OEB staff opinion letters on the merits of the dispute (which were requested by the developers and Elexicon), and the escalation to a formal complaint, which the Divisional Court had found was not subject to judicial review. The group of developers now argued that, since the OEB had only provided its views, the underlying dispute had not been decided. In its decision, the Court found that the application was an abuse of process, as the matter had been dealt with by the OEB. Additionally, it found that the core of the issue underlying the initial dispute, the interpretation of the Distribution System Code, falls within the exclusive authority of the OEB

Shepherd Rubenstein News

Both Jay Shepherd and Mark Rubenstein were listed in the 2025 edition of ‘Best Lawyers’. Mark was ranked by Chambers Canada in its 2025 guide.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

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SR Update

Energy Regulatory Update (Q2, 2024)

Summer has arrived, and so has the latest edition of the Shepherd Rubenstein Energy Regulatory Update, a quarterly round-up of important developments in the Ontario energy sector. Below are some of the key regulatory happenings between April and June. This past quarter saw the renaming of the Ministry of Energy to the Ministry of Energy and Electrification and the appointment of a new Minister and an Associate Minister with responsibility over energy-intensive industries

Ontario Energy Board

The OEB released several notable decisions over the past few months, including:

The final Phase 1 Benefit-Cost Analysis (BCA) Framework for Addressing Electricity System Needs was issued. The BCA Framework is required for all electricity distribution capital investments greater than $2M, beginning with applications filed in 2026. However, applications filed in 2024 and 2025 are strongly encouraged to use it.

As part of its ongoing Electric Vehicle Integration (EVI) Initiative, the OEB Staff released for comment a discussion paper that sets out a proposal for an electricity delivery rate for public EV charging stations with a low load factor through a reduced Retail Transmission Service Rate (RTSR).

The OEB concluded its Evaluation of Policy on Utility Consolidations consultation with the release of an updated MAADs Handbook, which reflects the consideration of stakeholder comments on an OEB Staff Discussion Paper.

A Stakeholder meeting was held and written comments were received as part of the OEB’s System Expansion For Housing Developments Consultation.

With the forecasted increase in the connection of new load and supply resources to the transmission system, including energy storage, the OEB launched a review of the connection-related section of the Transmission System Code (TSC).

The OEB issued the 2025 inflation parameters.

As part of its broader Distribution Sector Resiliency, Responsiveness, and Cost Efficiency (DRRCE) initiative, the OEB launched its Vulnerability Assessment and System Hardening (VASH) project. The VASH project is intended to incorporate climate resiliency into asset and investment planning activities, regularly assess the vulnerabilities in the system and operations in the event of severe weather, and prioritize value for customers when investing in system enhancements for resilience purposes.

There were a number of developments regarding application filing requirements. The OEB:

The OEB also made minor modifications to its standard conditions of approval for natural gas leave to construct applications.

In advance of the expected May 2025 implementation of the IESO’s Market Renewal Program (MRP), the OEB issued a letter outlining expected necessary amendments to various codes. It also issued draft accounting guidance related to commodity pass-through accounts.

Both the OEB’s Chief Executive Officer and Chief Commissioner provided their respective 2023-2024 year-end updates

The 2023 Innovation Sandbox Annual Report was released.

Assurances of Voluntary Compliance (AVC) were accepted from Festival Hydro and Rideau St. Lawrence Distribution related to billing errors that resulted in the overcharging of customers through the fixed monthly service charge. An AVC was also accepted from Kingston Hydro regarding non-compliant disconnection practices, as well as from Algoma Tubes Inc., who was operating without an electricity wholesale license.

Independent Electricity System Operator

The IESO released the results of its Long-Term 1 RFP (LT1 RFP), which was targeted to provide capacity between 2026 and 2028. The IESO procured 1784.2 MW of storage capacity at a weighted average price of $673.32/MW (per business day) and 410.7 MW of non-storage capacity (almost exclusively natural gas generation) at a weighted average price of $1,681.14/MW (per business day).

IESO stakeholder engagement continued on the Long-Term 2 RFP (LT2 RFP), which is expected to have both an energy and capacity stream, as well as long-lead time resources stream. The engagement included consideration on a wide range of issues including connection guidance and deliverability, changes to its proposed Enhanced PPA (E-PPA) revenue model, contract provisions, and resource eligibility. As part of the engagement, the IESO issued a preliminary connection guidance document. The IESO has also accelerated the timeline for the Mid-Term 2 (MT2) RFP to be held in advance of LT2 RFP.

The Ministers of Energy and Agriculture, Food and Rural Affairs also wrote to the IESO outlining policy considerations for developing energy projects on agricultural lands to be part of the development and design of all future procurement

The Minister of Energy also wrote to ask the IESO to continue engaging stakeholders on the development of, and report back with a draft design for, a Northern Hydro Program (NHP) to recontract existing large hydroelectric generation with installed capacity greater than 10 megawatts and whose existing contracts have or will expire before 2043

The Minister of Energy issued a directive to the IESO to extend the contracts of the Atikokan and Hornepayne biomass generating stations, as well as to implement some modifications to the Small Hydro Program to allow participation of aggregated contracts. The Minister of Energy also issued a directive to the IESO to enter into a funding agreement with Bruce Power to fund a portion of the Federal Impact Assessment for new nuclear generation on the existing Bruce site

Work continued on the development of a Transmission Selection Framework and prioritization of future enhancements to the Capacity Auction.

The IESO issued several reports, including the:

The IESO’s Grid Innovation Fund issued a targeted call for innovative projects focused on electrification and demand management.

Posted for review and comment were the final alignment batch of market rule amendments and related market for implementing the Market Renewal Program.

The Technical Panel recommended a number of market rule amendments related to the Market Renewal Program’s (MRP) market and system operations framework and calculation engine design. They were subsequently approved by the IESO Board of Directors. The Board of Directors also approved market rule amendments regarding the Transmission Rights market engagement and platform refresh.

Legislative and Regulatory

Bill 165, the Keeping Energy Costs Down Act, 2024, was passed. The legislation was introduced as the Government of Ontario’s response to the Phase 1 Decision in Enbridge’s 2024-2028 rates application. Bill 165 makes a number of amendments to the Ontario Energy Board Act, to, among other things, allow the Government to set by regulation the revenue horizon to be used by the OEB when setting natural gas distribution rates, and allow the OEB to exempt the requirement for leave to construct approval where it finds the specifics of a particular case require it, or where circumstances set out by regulation have been met (a more detailed summary was included in our Q1 2024 Edition).

Using these new authorities, the Government of Ontario issued Ontario Regulation 273/24, which sets the revenue horizon for natural gas distribution rates for small volume consumers (those using less than 50,000 m³) at 40 years and for all other consumers at 20 years. It also issued Ontario Regulation 274/24,, which exempts the requirements for leave to construct for a hydrocarbon line if the project cost is no more than $10M, and the OEB has determined that the duty to consult has been adequately discharged. The regulation also limits when leave to construct from the OEB is required for the relocation or reconstruction of hydrocarbon lines.

The Government of Ontario also:

  • Updated a proposal to amend Ontario Regulation 429/04 under the Electricity Act, to allow Class A customers under the Industrial Conservation Initiative (ICI) to enter into power purchase agreements (PPAs) with non-emitting generation facilities to allow them to offset their peak demand.
  • Proposal to amend Ontario Regulation 509/18 under the Electricity Act, to update the energy efficiency requirements and standards for 42 products and remove requirements for 3 existing products, to maintain harmonization with federal standards.

The Minister of Energy and Electrification (and previously the then Minister of Energy) announced the Government’s support for Ontario Power Generation’s plan to refurbish its Sir Adam Beck, R.H. Saunders, and number of Eastern Ontario hydroelectric generation stations.

Federal Government

The Federal Government, as part of its 2024 Budget, announced up to $5 billion towards a new Indigenous Loan Guarantee Program for energy and natural resource projects, the launch of work to establish a new Federal Permitting Coordinator, and a Crown Consultation Coordinator, and further details regarding the previously announced Clean Electricity Investment Tax Credit.

Bill C-59 and C-69 received royal assent, implementing the previously announced Clean Technology, Carbon Capture, Utilization and Storage (CCUS), Clean Technology Manufacturing, and Clean Hydrogen Investment Tax Credits (ITC). The CCUS and Clean Technology ITCs are now available for qualified businesses.

Bill C-59 also included amendments to the Competition Act that, among other changes, expands the scope of reviewable civil deceptive marketing practices to include certain environmental and climate change-related product representations that are not based on an adequate and proper test, and business activities that are not based on substantiation in accordance with an internationally recognized methodology. The Competition Bureau has said it will assess these new requirements and expects to issue guidance. Bill C-69 also included amendments to the Impact Assessment Act to address the Supreme Court of Canada’s reference opinion on the unconstitutionality of certain provisions.

Several notable reports were issued, including:

The Canada Growth Fund released its Carbon Contract Strategy.

Judicial Decisions

The Ontario Court of Appeal granted Enbridge’s motion for leave to appeal the Divisional Court’s decision in Essex (County of) v. Enbridge Gas Inc. In that decision, the Divisional Court had determined that the OEB had erred when it determined that a 1957 franchise agreement between the County of Essex and Enbridge had expired because of the application of the rule against perpetuates.

What We Are Reading

C.D. Howe Institute’s Mind the Gap: The Impact of Budget Constraints on Ontario’s Net Zero Plans report and the Ivey Energy Policy and Management Centre’s Corporate Governance Transparency: A Scorecard For Electricity Distribution Utilities In Ontario report.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

 Click here for a pdf version.

 

Categories
SR Update

Energy Regulatory Update (Q1, 2024)

Welcome to the latest edition of the Shepherd Rubenstein Energy Regulatory Update, a quarterly round-up of the important developments in the Ontario energy sector. Below are some of the key regulatory happenings between January and March.

Ontario Energy Board

The OEB released several notable decisions over the past few months, including:

The OEB announced the next steps in its Evaluation of Policy on Utility Consolidations consultation, with the issuance of an OEB Staff Discussion Paper for comment.

The previously announced generic proceeding on cost of capital has commenced. The proceeding is expected to review the methodology for determining the cost of capital parameters and deemed capital structures for regulated utilities, as well as matters related to the Cloud Computing Deferral Account.

The OEB completed its Consultation on a Policy for Standby Rates. After considering stakeholder feedback at a December stakeholder meeting, the OEB determined that it will not impose or recommend a default approach for pricing load displacement generation at this time. Distributors who believe a (new or modified) standby rate would be appropriate can apply for one at their next rebasing application. Distributors, who are currently operating with interim standby rates, were directed to seek to finalize those rates in either an IRM or their next rebasing application.

The OEB issued Non-Wires Solutions Guidelines for Electricity Distributors (NWS Guidelines). The NWS Guidelines replaces the existing CDM Guidelines for electricity distributors, reflecting new developments since 2021, and the fact that non-wires solutions that address system needs can encompass a broader range of solutions than just traditional CDM. As the NWS Guidelines make reference to the forthcoming BCA Framework, the OEB in its accompanying letter provided details on certain determinations it had made with respect to the BCA Framework, including materiality threshold and implementation.

A number of Notices of Proposal to Amend the Distribution System Code (DSC) were finalized:

The OEB sought comment from Indigenous communities and organizations, as well as natural gas utilities and other stakeholders, regarding proposed revisions to its Environmental Guidelines for the Location, Construction and Operation of Hydrocarbon Projects and Facilities in Ontario related to Indigenous consultation requirements.

The Very Small Utilities Working Group issued its report on the opportunities for reducing regulatory burden associated with the filing and review process of major rate applications for very small electricity distributors (less than 5,000 customers). The OEB subsequently issued a letter providing its response, generally accepting most of the recommendations and suggestions.

The OEB announced changes to the Low-income Energy Assistance Program Emergency Financial Assistance (LEAP EFA) that were recommended as part of its OEB Staff Report. The changes include:

  • Updating the income eligibility threshold to align with the newly expanded OESP income thresholds.
  • Increasing the grant amounts for electricity and natural gas from $500 to $650, and for those heating with electricity from $600 to $780.
  • Requiring that no eligible LEAP EFA be denied assistance due to lack of program funding, and establishing a generic deferral account for electricity and natural gas distributors to record incremental LEAP contributions above those embedded in rates.
  • Allowing intake agencies greater flexibility in which documents to accept from applicants.

An updated OESP and LEAP Manual was also issued to reflect changes to both programs.

The Rules of Practice and Procedure were amended to provide greater clarity regarding establishing and amending issues lists (Rules 28 and 32), as well as the filing of evidence, including from experts (Rule 13 and 13A).

In response to the Minister of Energy’s 2023 Letter of Direction, the OEB launched a consultation to review electricity distribution system expansion policies for housing developments, with a focus on connection and revenue horizons.

As part of the Reliability and Power Quality Review (RPQR), the OEB announced the introduction of voluntary reporting by electricity distributors of feeder level reliability data beginning in 2025 (for the 2024 calendar year). It also released a Guide to Addressing Electricity Distribution Power Quality Issues to assist both customers and distributors in managing and addressing power quality issues and promoting uniform practices.

To improve overall efficiency and right-size requirements of the Reporting and Record-keeping Requirements (RRR), the OEB held a stakeholder meeting and issued a number of updates. Other updates were made to implement the new voluntary feeder level reliability reporting, and Cyber Security requirements.

The OEB updated stakeholders on the activities arising from its June 2023 Improving Distribution Sector Resilience, Responsiveness and Cost Efficiency Report to the Minister of Energy. The RPQR Working Group has been asked to begin the discussion of issues regarding resilience, restoration, and customer communication. In parallel, the OEB Staff will be launching a vulnerability & system hardening initiative to consider how utilities should assess vulnerabilities in their systems and identify which risks can be cost-effectively mitigated. The OEB is also looking at distributor cost efficiency improvements through the use of cloud computing as part of the generic hearing on cost of capital, and will later in the year review distributor spending patterns to assess a need for further changes or incremental incentives.

An Assurances of Voluntary Compliance (AVC) was accepted from ENWIN Utilities, related to billing errors that resulted in the overcharging of customers through the fixed monthly service charge.

Independent Electricity System Operator

The 2024 Annual Planning Outlook (APO) was released. The 2024 APO looks at Ontario’s electricity system needs between 2025 and 2050. The IESO forecast shows demand will increase, on average, by about 2% a year, and that Ontario will transition from a summer-pealing to dual-pealing beginning in 2030

The IESO ramped up its stakeholder engagement on the Long-Term 2 RFP (LT2 RFP) with a number of stakeholder meetings considering issues such as revenue model, DER participation, and sitting and land-use requirements. As part of that process, the IESO announced that it will proceed with an Enhanced PPA (E-PPA) revenue model.

A procurement directive was issued by the Minister of Energy directing the IESO to extend the current contract for Hornepayne biomass generating station to May 14, 2024, while negotiations continue for a new contract.

In early January, the Minister of Energy wrote the IESO regarding two pump storage projects proposals in Meaford (TC Energy and Saugeen Ojibway Nation) and Marmora (OPG and Northland Power) that the IESO had previously been asked to provide an assessment. The Minister noted that the IESO analysis showed that under the current proposals, neither project compared favorably to currently available alternatives and so he was not prepared to make a final determination on either, while recognizing it did not assess broader social and economic benefits. The Minister has asked the Ministry of Energy to work with other ministries and the proponents to assess those broader benefits.   The Minister also asked one of the proponents for further information (Meaford), as well as noted the other was requesting additional time to submit further information (Marmora). The Minister also asked the IESO once it received the information to provide a further analysis and provide recommendations on proceeding with pre-development work. The Minister also said that he has asked the Ministry of Energy to work with the OEB and the project proponents on cost recovery mechanisms for his consideration.

The Minister also wrote the IESO to ask it to examine options for a post-2024 electricity energy efficiency framework and programs, and report back mid-March 15, 2024. In assessing those options, he asked that the IESO should consider as priorities, among others, a more enduring framework that potentially looks beyond a four-year timeframe, expanded program offerings, objectives and targets for beneficial electrification, feasibility and design options for demand flexibility, enhanced involvement of local distribution companies, improving the participant experience through enhanced electricity and natural gas program co-ordination. The Minister also asked the IESO to report back by April 2024 (coordinated with the OEB), on how residential and income-eligible natural gas and electricity energy efficiency programs could be delivered through a one-window approach, beginning as early as 2025.

Natural Resources Canada announced that it has provided up to $16.7M in funding to the IESO to support its Enabling Resource Program.

The Technical Panel recommended Market Rule amendments to implement Transmission Rights

Market Enhancement and Platform Refresh project. The Market Committee of the IESO’s Board of Directors also recommended changes to the Technical Panel Terms of Reference, to provide for additional communication between the Technical Panel and the IESO Board.

The IESO’s Board of Directors proposed amendments to its Governance and Structure By-Law related to Board independence and conflict of interest.

The IESO issued several reports, including:

The Exemption Panel approved Hydro One’s request for exemption from sections 7.1 and 7.2 of the Ontario Resource and Transmission Assessment Criteria (ORTAC), required to incorporate new load before it completes construction of a new Transformer Station.

The IESO announced that it had entered into a settlement with Genset Resource Management Inc. in December, for breaches of several market rules related to dispatch instructions in the operating reserve market.

Legislative and Regulatory

The Electrification and Energy Transition Panel (EETP) issued its report, Ontario‘s Clean Energy Opportunity. The comprehensive Report provides a recommended path to help Ontario navigate the transition to a clean economy in the long term based on 7 key principles. The Report also includes 29 specific recommendations, divided into 5 different key areas, planning for electrification and the energy transition, governance and accountability, true partnerships with Indigenous partners, innovation and economic development, and consumer, citizen and community perspectives.

The Government of Ontario introduced Bill 165, the Keeping Energy Costs Down Act, 2024 in response to the OEB’s Phase 1 decision in Enbridge’s 2024-2028 rates application. The legislation would make a number of amendments to the Ontario Energy Board Act, including:

  • Authorizing the Minister to issue directives requiring the OEB to hold generic hearings on any matter over which the OEB has jurisdiction. The directive may include procedural timelines and requirements, and apply to a matter that is subject to an on-going proceeding, but not a matter that has been determined by a final order of the OEB, if less than two years had passed.
  • Authorizing the Government by regulation to set the revenue horizon to be used by the OEB when setting natural gas distribution rates. The new authority would also allow by regulation the ability to require the OEB to hold a hearing to determine the revenue horizon and specific rules governing that hearing. In such a case that revenue horizon determined by the OEB would apply instead of that set by regulation. This section also has a sunset clause, being the earlier of January 1 2029, or as proclaimed by the Government.
  • Authorizing the Minister to issue directives that would require the OEB in considering leave to construct applications for a natural gas transmission or dual-purpose distribution/transmission lines, to require all customers to bear the full cost of the line and not require the payment of any capital contribution or surcharge. The section also includes a specific provision respecting orders made between the introduction of the legislation and the end of 2024 where the OEB renders a decision either denying leave to construct, or granting with conditions requiring the payment of a capital contribution. In such a situation, the Minister can issue a directive requiring a new hearing consistent with its new authorities. This is clearly aimed at the on-going Enbridge Panhandle Reinforcement Project proceeding where the issue of capital contributions has been raised by several intervenors.
  • Providing the authority for the OEB to exempt the requirement for a person to require leave to construct approvals where either it finds specifics of a particular case require, or circumstances set out by regulation have been met.

The Government of Ontario announced that it will support Ontario Power Generation’s plan to proceed with the initiation phase of the refurbishment of Pickering Nuclear Generation Station’s B units (5-8).

A number of new regulations and amendments to existing regulations were issued, including:

  • Amending Ontario Regulation 610/98, under the Electricity Act, defining which classes of persons cannot act as an officer or director of the IESO
  • Amending Ontario Regulation 160/99, under the Electricity Act, specifying that certain provisions of the Act with respect to Clean Energy Credits do not apply to the transfer of environmental attributes that are generated before January 1, 2027, if their transfer is the subject of a contract entered into before January 1, 2023.
  • Issuing Ontario Regulation 1/24, under the Ontario Underground Infrastructure Notification Act, increasing the time lime to respond from 5 to 10 days for standard locate requests made with regard to a large excavation or dig site.

The increased income eligibility threshold for the Ontario Electricity Support Program (OESP) takes effect on May 1, 2024.

Federal Government

Environment and Climate Change Canada released a public update report on the draft Clean Energy Regulations (CER). The public update report summarized feedback it had heard on the draft CER and provided changes that it was considering for comment. The IESO provided comments on the proposed changes, although noting that there was a lack of specificity necessary to assess their effectiveness in meeting Ontario’s needs.

Judicial Decisions

The Divisional Court in Leamington v. Enbridge Gas Inc. dismissed an appeal brought by the Municipality of Leamington regarding the terms of the OEB’s approval of a renewal of a franchise between Leamington and Enbridge. The Divisional Court disagreed with Leamington that the OEB lacked the authority to approve the terms and conditions based on the Model Franchise Agreement, and specifically the cost sharing provisions for gas relocation costs, over a party”s objection to their inclusion.

The Supreme Court of Canada released its decision in Yatar v. TD Insurance Meloche Monnex. The decision confirms that even if a statutory right of appeal is limited to a question of law, that does not prevent a judicial review from being brought to challenge other aspects of the decision that would not fall within the scope of the right of appeal. The decision is important, as many energy regulators’ governing statutes have limited rights of appeal. For example, section 33(2) of the Ontario Energy Board Act limits appeals to questions of law and jurisdiction. Yatar confirms that notwithstanding the limited right of appeal, a party could bring a judicial review for an alleged error in fact or mixed fact and law. Like any other judicial review, however, a judge may still exercise discretion to grant relief, for example if there is an adequate alternative remedy.

In New Brunswick Power Corporation v. New Brunswick Energy and Utilities Board, the New Brunswick Court of Appeal dismissed a judicial review brought by NB Power regarding a decision of the New Brunswick Energy and Utilities Board (NBEUB). NB Power had argued that the NBEUB decision on its 2023-2024 general rates application was unreasonable. The NB Court of Appeal ruled that the decision by the NBEUB to reduce the proposed revenue requirements based on updated evidence, including loss in the prior years, was not unreasonable.

Shepherd Rubenstein News

Both Mark Rubenstein and Jay Shepherd were recognized in the 2024 Canadian Lexpert Legal Directory.  Mark was ranked by Chambers in its 2024 Global Legal Guide

What We Are Reading

There are a lot of interesting developments across the country. In Nova Scotia, the Clean Electricity Solutions Task Force released its Final Report, which included a proposal for an independent system operator model and standalone energy regulator. The Nova Scotia Government announced it will implement those recommendations, at least in part, but other recommendations will require further consideration. In Alberta, the government requested the Alberta Electric System Operator (AESO) to work with stakeholders to work on a restructured energy market based on an AESO’s recommendation report.  The Alberta Government, as part of its renewable energy sitting policy changes, released the Alberta Utilities Commission (AUC) Module A report. The AUC also released a report authored by Guidehouse, analyzing the incremental distribution costs in Alberta from increasing DER pentation related to the transition to net-zero.

We have also been reading the Regulatory Assistance Project’s Elevating the Priority of Decarbonization in Energy Regulators’ Decision Making Report.

As always, if you have any questions, or think we can be of assistance to you or your organization, please do not hesitate to reach out to Mark Rubenstein at mark@shepherdrubenstein.com.

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