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:
- Approving Enbridge Gas’s application for a one-year extension of its currently approved 2023–2025 natural gas DSM Plan into 2026, rolling forward all existing programs and budgets to ensure continuity of demand side management activities.
- Denying two utilities’ requests to establish new deferral and variance accounts to track the impacts of cost allocation and accounting methodology changes outside of a rebasing application. The OEB denied Milton Hydro’s request to track incremental costs arising from changes in shared services and corporate cost allocations, and Alectra’s request to track the impacts of updated asset useful lives reflected in a third-party depreciation study, to be filed with its next rebasing application, and changes to its direct labour capitalization methodology.
- Declining to proceed with the motion to review of Enbridge’s Integrated Resource Planning (IRP) Pilot Project Decision that it had initiated, finding that doing so would not result in a more just, expeditious, or efficient determination of the issues given the ongoing IRP review. The OEB noted that its determination does not prevent another party from bringing its own motion to review the IRP Pilot Decision, which Enbridge subsequently filed.
- Approving Windsor Canada Utilities Ltd.’s (parent of ENWIN Utilities) acquisition of E.L.K. Energy Inc.
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:
- Launched a review of Distributed Energy Resources (DER) valuation.
- Announced the membership of the Regional and Bulk Planning Process Advisory Group to assist the OEB in identifying opportunities for enhancing the regional and bulk planning processes.
- Launched a consultation on gas-electric coordination and information sharing, and released an OEB Staff discussion paper in advance of the first forum to be held in January.
Separately, to support promoting DERs to meet system needs, the OEB also:
- Launched a consultation on Phase 2 of the Benefit-Cost Analysis Framework for Addressing Electricity System Needs with the aim of refining the Energy System Test, and is considering extending the BCA Framework to include societal impacts associated with energy conservation investments.
- Issued Notice of final amendments to the Distribution System Code establishing a default value of 25%, subject to eligibility criteria, for distributors to receive a margin of payments incentive for the use of third-party DERs to meet distribution system needs.
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:
- A proposal to create regulations revising cost responsibility for certain electricity customer connection infrastructure in high growth areas, allowing distributors and/or transmitters to build connection capacity in anticipation of future customers and shifting some excess capacity cost and risk away from a single first mover.
- A proposal for an optional Class B time-of-use pricing plan that would introduce time-varying Global Adjustment charges for non-RPP customers.
- The design of a permanent electricity Interruptible Rate Program, building on the IESO’s three year pilot.
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.
