Category: Insights

Fall has definitely arrived, and so has 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 developments from July through September 2026.

Ontario Energy Board

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

• Approving, in part, Lakeland Power’s Z-factor claims for costs arising from the March 2025 ice storm and a June 2024 lightning strike that destroyed a substation transformer. The OEB disallowed regular-hours internal labour and unspent reactive capital already funded through base rates, the replacement of poles that were already in poor condition, and $200,000 of the $300,000 Lakeland paid its affiliate to rent a temporary transformer.
• Granting Hydro One leave to construct the Welland Thorold Power Line Project, an 18.5 km, 230 kV double-circuit line to supply Crowland TS, with an estimated cost of $311.4M. The OEB accepted Hydro One’s proposal to allocate the line costs entirely to the network pool, rather than the alternative allocation proposed by OEB staff.
• Granting two appeals of decisions made under delegated authority denying electricity retailer licences. First, in GridERP’s appeal, based on updated financial and operational evidence filed on appeal, the OEB issued a two-year licence, rather than the standard five-year term. Second, in Chosen Energy’s appeal, the OEB found that the delegated authority did not explain why Chosen Energy could not reasonably be expected to be financially responsible or technically capable. Based on its own review, the OEB found that Chosen Energy met the requirements, but also issued a two-year licence.

The OEB finalized updates to its Non-Wires Solutions Guidelines, including a new appendix on Stream 2 local electricity demand-side management (eDSM) programs. Stream 2 programs are delivered by distributors and funded through distribution rates and the Global Adjustment, in proportion to the benefits they provide to the distribution system and the broader electricity system. Distributors can seek funding starting with their 2027 rate applications.

The OEB released three reports to the Minister of Energy and Mines required by the Minister’s Integrated Energy Plan implementation directive:

• The DER Valuation Report, with recommendations on compensation, delivery rates and connection policies for distributed energy resources (DERs). These include moving from net metering to net billing, with exports compensated based on time and location, and prioritizing Retail Transmission Service Rate exemptions for IESO-procured storage connected to distribution systems.
• The Regional and Bulk Electricity Planning Processes Review Report, recommending, among other changes, a forecast standard for utilities and process changes to shorten the current 29-month regional planning cycle by up to five months. The OEB subsequently launched its Regional Planning Reform Implementation initiative, which will include amendments to the Transmission System Code and Distribution System Code and the reconvening of the Regional Planning Process Advisory Group.
• The Distribution System Operator (DSO) Roadmap, setting out four workstreams: defining DSO capabilities, defining flexibility services, a mandatory assessment of distributor DSO readiness, and longer-term policy.

The OEB also published its March 2025 report to the Minister on dynamic pricing for non-RPP Class B customers, recommending the phased introduction of an optional time-of-use price plan for the Global Adjustment.

The Minister of Energy and Mines also sent a letter directing the OEB to report back by January 15, 2027 on criteria for assessing natural gas expansion projects, should funding become available for a third intake of the Natural Gas Expansion Program.

A review of customer service rules for electricity and natural gas distributors and unit sub-meter providers was launched, focusing on billing error corrections, account opening and closing processes and related charges, and eligibility for a second arrears payment agreement.

The OEB published its annual total cost benchmarking update and stretch factor assignments for 2027 electricity distribution rates and 2025 electricity distributor scorecards. It also launched an Adjudicative Cost Reporting Dashboard, which reports applicant, intervenor and OEB costs in electricity cost of service proceedings.

Updated filing requirements were issued for 2027 electricity rate applications, covering general requirements (Chapter 1) and incentive rate-setting applications (Chapter 3).

The 2025-2026 Annual Compliance Report was released.

The Market Surveillance Panel issued a report on locational pricing in the first year of the renewed market, finding that congestion was highly localized, with the Northwest the most frequently congested zone.

Independent Electricity System Operator

The IESO released final bulk transmission plans for three regions, each identifying near-term investments and options for longer-term needs:

• North of Sudbury: new 230 kV lines and stations in the Kirkland Lake, Timmins and Kapuskasing areas, with early development work on new 500 kV lines from Hanmer TS (Sudbury) to Porcupine TS and from Porcupine TS to Pinard TS.
• South and Central: new or expanded 500/230 kV transformer stations at Kleinburg, Guelph North and Milton, with associated 500 kV lines.
• Eastern Ontario: new 230 kV double-circuit lines from St. Lawrence TS to Merivale TS and from Napanee TS to Belleville TS, with a new west Ottawa station and an Ottawa to Greater Napanee line identified for future consideration.

Engagement continued on the IESO’s competitive procurement of a transmitter for the Toronto Third Line. The IESO posted a draft contract and consulted on functional requirements, proponent qualifications, cost containment and Indigenous participation, ahead of an RFP expected in Q2 2027.

The IESO held a webinar on addenda to the Long Lead-Time (LLT) energy and capacity RFPs, which were issued in May. Proponent registration runs from September 23 to October 6, with proposals due November 26.

It also announced it is securing additional short-term capacity to accommodate facility maintenance requested for this winter through 2028. It increased the 2026 Capacity Auction targets from 1,800 MW to 2,000 MW for summer 2027 and from 1,200 MW to 1,400 MW for winter 2027/2028, and acquired 600 MW of firm import capacity for six months beginning November 1.

Changes to connection process deposits took effect September 9, introducing a tiered structure based on project size and updating deposits for technical feasibility studies.

A revised version of the IESO’s technical requirements for large computational loads, such as AI data centres, was released. The requirements, which include voltage and frequency ride-through and limits on load changes, apply to loads over 10 MW and will be incorporated into the market rules or market manuals.

The Technical Panel recommended market rule amendments addressing Capacity Auction settlements and the market rule amendment process, along with related changes to its Terms of Reference.

The IESO published its list of Potential Constrained Areas for market power mitigation, based on constraint data from the first year of the renewed market. The list takes effect November 16, and the IESO may designate any of these areas as a Dynamic Constrained Area if congestion criteria are met.

Consultation continued on Intertie Offer Guarantee payment conditions, with proposed changes that would limit payments to periods when the IESO has identified a system adequacy need.

The IESO consulted on ramp rates for battery energy storage facilities, and intends to codify in the market rules its existing 100 MW per minute limit on storage responses to five-minute energy dispatch instructions.

As part of its Enforcement Modernization engagement, the IESO responded to stakeholder feedback on proposals that include mandatory internal compliance programs, expanded information-gathering powers, and higher maximum penalties.

The IESO also held an engagement session on proposed enhancements to the Expanded Energy Management program for the 2028-2030 eDSM framework.

The IESO released the Capacity Expansion Module of its 2026 Annual Planning Outlook, which models theoretical least-cost resource portfolios to meet system needs to 2050 under multiple scenarios.

The Q3 2026 Reliability Outlook and updated methodology were released.

Legislative and Regulatory

The Ontario Government released a draft Data Centre Playbook framework for consultation, setting out how it will assess requests by large data centres to connect to the grid, based on economic development, data security and community benefits. It also announced proposed measures to have data centres pay the full cost of their impact on the electricity system, including a separate Global Adjustment rate class for new data centres above a demand threshold (the government cited 1 MW), and prioritizing projects that build their own generation.

The Ontario Government amended the following regulations:

• Ontario Regulation 410/22 under the Ontario Energy Board Act, 1998, revising the timing of Hydro One’s pole completion obligations and related reporting requirements for designated broadband projects.
• Ontario Regulation 610/98 under the Electricity Act, 1998, creating an exception to the IESO board eligibility restrictions for directors, officers and employees of specified public sector entities, including school boards, post-secondary institutions, hospitals and municipalities.

Through the 2025 intake of the IESO’s Indigenous Energy Support Program, the government announced $25M for 148 Indigenous-led energy projects. Applications for the 2026 intake close October 2.

The Ministry of Municipal Affairs and Housing sought input on a Commercial Property Assessed Clean Energy (C-PACE) framework, under which participating municipalities could facilitate private financing for energy efficiency, renewable energy and water conservation upgrades to commercial, industrial and multi-residential properties, repaid through property tax bills.

Ontario and OPG announced $500,000 in growth readiness funding for St. Clair Township to take the next steps on new generation, including potential natural gas and nuclear, at OPG’s Lambton site, which is zoned for up to 900 MW. The announcement allows the Township and OPG to sign a memorandum of understanding and advance work on the site.

Construction began on the refurbishment of OPG’s Pickering B units, which are being removed from service by the end of September. Reactor refurbishment work will begin pending CNSC approval.

Ontario and Alberta unveiled the proposed route for the Northern Shield Energy Corridor, a proposed crude oil pipeline running approximately 3,300 km from Hardisty, Alberta to Sarnia, with an estimated initial capacity of 500,000 barrels per day. Ontario’s feasibility study, which will examine costs and commercial models, is expected to be completed by the end of 2026.

Federal Government

The Federal Government introduced Bill C-39, the Building Canada Strong Act. Among its energy-related changes, the bill would amend:

• The Impact Assessment Act to require decisions on agency-led assessments within one year after the proponent provides the required information or studies, assign assessments of designated projects involving nuclear activities to the Canadian Nuclear Safety Commission, and coordinate federal authorizations and Indigenous consultation.
• The Canadian Energy Regulator Act to make the CER the sole assessor of pipeline, designated power line and offshore renewable energy applications, establish a one-year decision period, and coordinate federal authorizations and Indigenous consultation.
• The Building Canada Act to apply a framework similar to the one for national interest projects to certain projects within designated regions of national interest.

A number of the changes had been subject to an earlier consultation, following which a What We Heard report was released.

A new Cabinet Directive on Getting Projects Built in Canada sets out a coordinated approach to federal reviews, with the aim of decisions within one year after the proponent provides a comprehensive application and the required information and studies. A separate letter to the CER’s CEO addresses planning for the proposed legislative changes and coordination of federal permitting and Crown consultation.

Separately, amendments to the Physical Activities Regulations under the Impact Assessment Act came into force on September 3, removing CER-regulated projects, fossil fuel-fired power generating facilities and certain in situ oil sands facilities from the list of projects subject to federal impact assessment.

The Canada Energy Regulator approved TransCanada PipeLines Limited’s negotiated settlement setting Mainline tolls for 2027 to 2030. Two Ontario First Nations (Aroland and Ginoogaming) opposed the settlement, arguing they had been excluded from the negotiations and that the tolls should include a revenue stream for affected First Nations. The CER found they were not interested parties under its settlement guidelines, as they have no commercial interest in the Mainline tolls, and that the settlement does not affect their claims or section 35 rights.

The Department of Finance proposed the Productivity Mega Deduction, which would permanently allow immediate expensing of most capital property acquired on or after September 15, 2026, in the year it becomes available for use. Exclusions include buildings and Class 51 natural gas distribution pipelines.

Newfoundland and Labrador and Quebec announced a new agreement to replace the 1969 Churchill Falls power contract and the December 2024 memorandum of understanding, including upgrades and an expansion at Churchill Falls and development of the 2,700 MW Gull Island project. The governments will now work to implement final binding agreements. The Federal Government announced up to $10B in financial support and investments, including a loan guarantee for Gull Island.

Natural Resources Canada announced nearly $19M from its Clean Fuels Fund to expand StormFisher’s renewable natural gas facility in London, Ontario.

The Federal Government launched Canada’s Responsible Data Centre Development Principles, a national baseline for assessing data centre proposals. The five principles include that data centres must not shift electricity costs to Canadians.

Judicial

In FortisAlberta Inc. v. Alberta Utilities Commission, the Alberta Court of Appeal largely dismissed appeals by FortisAlberta, ENMAX and ATCO Electric of the AUC decision setting the parameters for the 2024-2028 performance-based regulation (PBR) term. The Court upheld the AUC’s use of historical capital additions to set supplemental capital funding, its adjustment of the productivity factor, and its criteria for exceptional capital funding, finding no error of law. However, it allowed Fortis’s appeal on one issue, Fortis’s request to remove the stretch factor to account for its obligation to serve rural electrification associations, which it found the AUC had rejected without explanation. The Court also encouraged the AUC to write its decisions so that a lay reader can understand them, including by relying less on acronyms.

In ATCO Gas and Pipelines Ltd. v. Alberta Utilities Commission, the Alberta Court of Appeal dismissed ATCO Gas and ATCO Electric’s appeal of the AUC decisions reopening their 2018-2022 PBR plans and ordering customer refunds. Both utilities had earned more than 300 basis points above their approved return on equity in 2021 and 2022, triggering the plans’ reopener provision. The AUC found the excess earnings resulted from factors other than efficiencies. The Court held that PBR rates remain subject to the just and reasonable standard and that returns above the approved level are acceptable when they flow from the plan’s intended incentives, but not when they arise from unrelated factors. It also held that the reopener provision brought the refunds within the knowledge exception to the rule against retroactive ratemaking, even though the PBR term had ended.

Shepherd Rubenstein News

Both Jay Shepherd and Mark Rubenstein were listed in the 2027 edition of ‘Best Lawyers’, where Mark was Energy Regulatory Law “Lawyer of the Year” for Toronto. Mark was ranked by Chambers Canada in its 2027 guide.

Mark will be speaking on the panel “That’s why they’re called KEY accounts” at The Last Mile, a policy symposium on electricity distribution co-hosted by Electricity Canada and the National Electricity Roundtable, taking place October 21 in Ottawa.

Things We Are Reading

The International Energy Agency’s Special Report on Electrification, E3’s Compensating DER for Local Distribution Value While Protecting Affordability, Electricity Canada’s Building Grid Resilience through Interprovincial Interties, and Clean Energy Canada’s Advancing Virtual Power Plants in Ontario and The Value of Using DERs for Distribution System Services in Ontario.

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.

Welcome to the latest edition of the Shepherd Rubenstein Energy Regulatory Update, our quarterly roundup of key developments in Ontario’s energy sector. This edition covers developments from January through March 2026.

Ontario Energy Board

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

• Approving a settlement proposal for Phase 3 of Enbridge Gas’s 2024–2028 rebasing proceeding, which addresses the harmonization of rates across Enbridge Gas’s legacy Union Gas and Enbridge Gas Distribution service territories. The settlement, among other matters, reduces 42 rate classes to 16, establishes one distribution rate zone and three gas supply, storage, and transportation zones, and introduces a rate mitigation plan that phases in bill impacts for some customers.

• In Elexicon Energy’s Incremental Capital Module (ICM) application, the OEB approved incremental funding of $6.55 million of the proposed $9.7M for the Sandy Beach Transformer Station project, but denied the requested $18.38M for the Dual Element Spot Network project at Belleville TS, finding that it was not prudent for customers to pay for the project beginning January 2026, when the forecast in-service date is not until December 17, 2026.

• Approving for recovery, in part, Greater Sudbury Hydro’s request for certain amounts for Other Post-Employment Benefits (OPEBs) resulting from a previous transition from cash to accrual accounting. Greater Sudbury Hydro had proposed to recover a net amount of $18.19M from ratepayers over ten years. The OEB approved only $9.5M of the OPEB Transitional Amount DVA balance.

• Granting Enbridge Gas leave to construct approximately 3.1 kilometres of natural gas pipeline in the Town of Oakville and the City of Mississauga, to serve three existing industrial customers. Commissioner Dodds dissented in part, opposing a condition imposed by the majority requiring Enbridge Gas to provide copies of the Stage 2 Archaeological Assessment and Cultural Heritage Assessment Report to affected First Nations for review and comment before submitting them to the Ministry of Citizenship and Multiculturalism.

Draft updates to the Non-Wires Solutions Guidelines were issued for comment, including a new appendix providing guidance on Stream 2 local electricity demand-side management (eDSM) programs. The OEB also released draft revisions for Phase 2 Revisions to the BCA Framework

The OEB CEO issued the first policy direction under the new section 13.1 of the Ontario Energy Board Act, directing OEB staff to identify portions of  Integrated Energy Plan that are relevant to matters at issue in a proceeding.

The OEB issued a Notice of Hearing commencing a generic review of the Model Franchise Agreement for Natural Gas. The review will examine provisions relating to alternative easements, pipeline relocation cost-sharing, disposition of decommissioned gas systems, and non-substantive administrative updates.

Through its Innovation Sandbox, the OEB announced funding for five energy projects that empower Indigenous innovation and leadership.

The OEB launched its Centralized Capacity Information Map (CCIM), a new tool providing transparent grid capacity data for both load and distributed energy resource connections across Ontario.

Updated filing requirements for natural gas rate applications were released.

The OEB issued its 2026 annual updates to the Electricity Reporting and Record Keeping Requirements (RRR).

An Assurance of Voluntary Compliance was entered into with Entegrus Powerlines Inc. regarding the incorrect application of the Ontario Electricity Support Program (OESP) credits to water and wastewater.

The OEB entered into a Memorandum of Understanding with the Technical Standards and Safety Authority (TSSA) regarding hydrocarbon pipelines in Ontario, clarifying the respective regulatory roles and responsibilities of the two organizations.

As part of its 10-Point Action Plan, the OEB released an implementation update on Item 2, establishing budgets for intervenors in certain applications, and Item #3 categorizing intervenors by interests and developing approaches for increasing collaboration. It also released its Active Adjudication Information Sheet.

Independent Electricity System Operator

The IESO released its 2026 Annual Planning Outlook (APO), projecting a 65% increase in electricity demand over the next 25 years, down from the 75% growth projected in the 2025 APO. The revised forecast reflects lower expected demand from electric vehicles and data centres, partially offset by continued growth in electrification and economic activity. 

The IESO continued engaging and preparing for the Long Lead-Time (LLT) RFP, including updates to the draft RFP and contracts, and the introduction of incentives in the RFP evaluation for commitment to use Canadian content. As a procurement directive was not expected by the end of March, the IESO indicated that the launch of the RFP in April.

The Technical Panel approved a market rule amendment addressing adjustments to real-time make-whole payments (subsequently approved by the IESO Board of Directors).

The IESO launched its Corporate Power Purchase Agreement (C-PPA) framework for industrial, commercial, and institutional (ICI) participants for the 2026–2027 base period, pursuant to the amended O. Reg. 429/04. The framework allows eligible ICI participants to enter into C-PPAs with renewable generators. The submission window was open from February 1 to March 30, 2026.

The IESO finalized the membership of the Renewed Market Advisory Forum (RMAF).

The Q1 2026 Reliability Outlook was released.

Legislative and Regulatory

OPG and the Municipality of Port Hope announced an agreement to advance a new nuclear generating station at Wesleyville, with potential capacity of up to 10,000 MW. OPG filed an Initial Project Description with the Impact Assessment Agency of Canada on January 12, 2026, initiating the federal impact assessment process.

The Ontario Government approved the construction of a new transmission line to downtown Toronto, the first project to proceed through an IESO-led competitive transmitter selection process. The project involves an approximately 900 MW underwater high-voltage direct current (HVDC) cable from the Darlington area to downtown Toronto, with construction expected to take seven to ten years.

Late last year, the Ontario Government declared the Greenstone Transmission Line was a priority project, a 230 kV single-circuit line, between Nipigon Bay and Aroland First Nation. In January, the Ministry of Energy and Mines directed that Hydro One be designated as the transmitter. The Ontario Government also declared the Barrie to Sudbury Transmission Lines a priority project, consisting of two 500 kV lines between Essa Transformer Station and Hanmer TS, the Minister directed the designation of Hydro One as the transmitter for the project.

The Ministry of Energy and Mines launched a study to identify and protect a corridor of land for future transmission infrastructure within and adjacent to the Parkway Belt West Plan lands.

Initiated by Ontario, ten provinces and territories signed a National Energy Corridor Agreement on March 4, 2026, committing to expand interprovincial transmission and energy infrastructure.

Federal Government

Bill C-15, the Budget Implementation Act, 2025 received royal asset, bringing the Clean Electricity Investment Tax Credits into force. The Department of Finance also held a consultation regarding the possible introduction of domestic content requirements as part of the Clean Technology and Clean Electricity Investment Tax Credits.

The Government of Canada announced investments to unlock Canada’s critical minerals, including up to $17.8 million under the Energy Innovation Program for four projects to advance clean energy technologies. Separately, the Government of Canada announced  $28.9 million for 12 clean energy technology projects under the Energy Innovation Program, including $16.9 million for carbon capture, utilization and storage projects, $9.2 million for renewable energy projects, and $2.8 million for smart grid regulatory innovation and capacity-building projects.

Judicial

In Environmental Defence Canada Inc. v. Ontario Energy Board, the Ontario Divisional Court dismissed an appeal by Environmental Defence (ED) of OEB decisions granting Enbridge Gas leave to construct four natural gas pipelines under the National Gas Expansion Program (NGEP). ED argued that the OEB erred in law and breached procedural fairness by denying its requests to file evidence on the cost-effectiveness of heat pumps relative to natural gas and to convene a technical conference. The Court held that the OEB did not apply the incorrect legal test in refusing the proposed evidence and that the OEB properly considered whether its probative value outweighed the need for expeditious resolution. Applying the five Baker factors, the Court found that ED’s procedural rights as an intervenor were at the lower end of the spectrum and that the OEB’s discretion to control its own process was entitled to considerable deference.

Shepherd Rubenstein News

Mark Rubenstein will be a panelist at the Ontario Bar Association’s Energy Law 2026: Corporate, Regulatory & Policy Changes virtual program. No need to be an OBA member (or even a lawyer) to attend.

Things We Are Reading

OpenGridWorks, an incredibly cool visualization of electricity generation sources and transmission lines across Canada and the United States, the Ontario Energy Association’s Ontario DSO Roadmap, the Lawrence Berkley National Laboratory’s, United States 2026 Retail Electricity Price Trends and Drivers Update, Professor Paul Daly’s annual tour de force article on administrative law developments relevant 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.

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 1^st. 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.