Proposed Amendments to the Electricity Act, 1998, Ontario Energy Board Act, 1998 and the Municipal Franchises Act, to secure energy for generations.

The Ministry of Energy and Mines (the “ministry”) is seeking feedback on legislative amendments that would support the delivery of the government’s first Integrated Energy Plan and enable a more affordable, secure, reliable and clean energy future. Additional information on each of the proposals can be found below: 

1. Data Centres:

Under section 26 of the Electricity Act, 1998 electricity transmitters and distributors are required to provide non-discriminatory access to their networks. Recent growth in the data centre sector, in particular, has the potential to place pressure on the electricity system due to constraints on both generation and transmission capacity. According to the Independent Electricity System Operator (IESO), Ontario’s data centre forecast represents about 13 per cent of new electricity demand in the province by 2035.  

To help address this issue, the ministry is proposing amendments to the Electricity Act, 1998, that, if passed, will provide regulation-making authority to enable a framework to evaluate electricity connection requests of certain large data centres, and if needed, prohibit a transmitter or distributor from connecting those data centres to the transmission / distribution system unless connection requirements that are specified in regulations are met. 

Proposed amendments also include regulation-making powers for the Lieutenant Governor in Council to set out conditions, requirements, limitations or approvals for “specified connection requirements”, as defined in the proposed legislation. The proposed legislation also defines “specified load facility” (i.e., the data centres and any other prescribed entities the framework would apply to). 

In addition to the proposed amendments, the ministry, working with the Ministry of Economic Development, Job Creation and Trade, will separately be seeking feedback on future regulations that will be needed to implement the framework. 

2. Establishment of Deferral and Variance Accounts to Record Higher Costs from Procurements:

The Protect Ontario by Unleashing Our Economy Act, 2025 introduced directive and regulation-making authority to impose certain procurement-related restrictions related to the country, region, or territory of origin of any good or service procured by the Independent Electricity System Operator (IESO), Ontario Power Generation (OPG), or certain rate-regulated entities (electricity and natural gas transmitters and distributors and any prescribed subsidiaries of those entities). If that authority is exercised, the applicable entities would not be permitted to procure a good or service if the prescribed conditions respecting the country, region or territory of origin of the good or service are met. This may result in higher procurement costs for these entities. 

The ministry is now seeking feedback on additional amendments to the Ontario Energy Board Act, 1998, that would allow certain rate regulated entities covered by any such procurement restrictions to establish a Deferral or Variance Account to track increased costs stemming from limited access to contracts from certain jurisdictions and have those costs reviewed by the Ontario Energy Board (OEB) for prudency and potential recovery through rates.

3. Adding Economic Growth to the Objective and Objects of the Independent Electricity System Operator (IESO) and the OEB:

The ministry is proposing a series of amendments to update the objectives of the OEB and the objects of the IESO to ensure that economic development is a core consideration in electricity system planning and decision-making. The proposed amendments are targeted towards enhancing electricity transmission and distribution planning processes to account for the expediency of the electricity grid buildout to drive innovation and economic growth, and to strengthen self-reliance and energy security. Amendments to the Ontario Energy Board Act, 1998 and the Electricity Act, 1998 include:

• A reference in the Ontario Energy Board Act, 1998 to “economic growth” in the OEB’s objectives for the electricity sector, and related amendments as needed to ensure consideration of economic growth in Leave to Construct proceedings (e.g., for transmission projects); and
• A reference in the Electricity Act, 1998 to “economic growth” in the IESO's objects as well as in the purposes of the Act.

4. Expanding the Purposes of the Electricity Act, 1998 to Include Hydrogen-Related Pilot Projects and Funding Programs 

The government has recently announced a new, expanded funding call of the Hydrogen Innovation Fund (HIF). To support the implementation of the HIF, the ministry is proposing amendments to the Electricity Act, 1998 that would expand the purposes of the Act to include facilitating the development of a hydrogen market and economy, to support potential uses and applications of lower-carbon hydrogen. One of the policy intents of the proposed change is to provide clarity to enable the IESO to undertake pilot projects for hydrogen initiatives with non-electricity applications (e.g., transportation, industrial uses). This would also complement a recent regulatory change that added the promotion of lower carbon hydrogen as a cleaner energy source, among other uses, as an object of the IESO. 

5. Enabling Scoped Policies by the OEB Chief Executive Officer regarding aspects of the OEB’s Adjudicative Process 

Proposed amendments to the Ontario Energy Board Act, 1998 will, if passed, enable the OEB Chief Executive Officer (CEO) to issue scoped policies to Commissioners and OEB employees regarding certain aspects of the OEB’s adjudicative process. 

For clarity, this authority would not bind Commissioners to make determinations in alignment with government direction/policy. Instead, the objectives of the proposed amendments are to provide a mechanism to enhance consistency and transparency in how adjudicative matters are managed (in terms of timelines for proceedings) and in terms of the information to be considered, such as a specific government policy statement that is relevant to the matter before the OEB. 

6. Municipal Franchises, Municipal Franchises Act and the Public Utilities Act

Under the Municipal Franchises Act (MFA), municipal electors’ assent (i.e., approval of the franchise by voters in the municipality through a public vote) is currently required for a municipality to grant a franchise to a natural gas company. However, existing provisions within the MFA already allow the OEB to waive the requirement for municipal electors’ assent if the OEB, after holding a hearing, is satisfied that it is not necessary. The process to obtain municipal electors’ assent can be administratively burdensome and costly for some municipalities. Franchise applications often include a request to waive this requirement and the OEB has granted that request in the vast majority of cases.

As a result, the ministry is proposing amendments, that if passed, will remove reference to the municipal electors’ assent requirements for natural gas municipal franchises. The proposed amendments would also clarify the scope of a franchise renewal/extension as including the right of natural gas distributors to operate, as well as to construct, extend or add to natural gas distribution works (e.g. natural gas infrastructure). Consequential amendments to the Public Utilities Act would also be made to reflect and align with the changes described above to the MFA.

7. Future Clean Electricity Fund (FCEF)

The Emission Performance Standards (EPS) program is an alternative to the federal industrial carbon pricing program. This made-in-Ontario program is designed to regulate greenhouse gas emissions (GHGs) from large industrial facilities by setting standards, rewarding innovation and taking into consideration specific industry/facility conditions while allowing for economic growth. In March 2023, the government announced the Future Clean Electricity Fund (FCEF), which would use proceeds from the Emissions Performance Standards program and net proceeds derived from the transfer of OPG and IESO clean energy credits (CECs) to offset costs associated with clean energy projects since the program’s inception. 

The proposed legislative amendments, if passed, will enable the implementation of the FCEF by allowing certain amounts payable for non-emitting and rate-regulated hydro-electric and nuclear electricity resources, as well as transmission projects, to be funded by proceeds from the FCEF. 

Environmental Impact

The proposed legislative amendments are not expected to have negative material impacts on the environment. Select proposals could instead have some positive impacts on the environment. 

Hydrogen, when used as a fuel source in some applications or for energy storage, has the potential to reduce greenhouse gas emissions. The proposed amendments focus on expanding the purposes of the Electricity Act, 1998 to include hydrogen and would support the implementation of the Hydrogen Innovation Fund by the IESO and the overall goal of spurring innovation and advancing the clean energy economy in Ontario. 

Legislative amendments related to implementing the FCEF could also benefit the environment given the amendments, if passed, intend to invest proceeds from the EPS to offset the cost of clean energy projects. 

Separate consultations will be had on potential future regulations needed to implement the legislative amendments and further consideration would be given at that time to potential environmental impacts. 

Analysis of Regulatory Impact

It is not anticipated that the proposed amendments would directly impose any new requirements on businesses or the public at this stage given they are enabling in nature. Upon issuing new regulations associated with the proposed amendments, further regulatory impact assessments would be undertaken.