Ontario writes the playbook: a new framework for data centre grid connections

On August 13, Ontario released long-awaited details on how the province will regulate the connection of data centres to its electricity grid¹. Titled the Data Centre Playbook (the Playbook), the proposed framework outlines how the province plans to evaluate large-scale data centres against the government’s objectives of driving economic growth, keeping Canadians’ data in Canada, and delivering benefits to local communities². In addition to the Playbook, Ontario is also exploring a separate Global Adjustment (GA) rate class for new data centres. With consultation open until September 12, 2026, investors and other interested parties have the opportunity to provide feedback to shape the final regulatory regime.

What you need to know

• Ontario’s approach. Under the Protect Ontario by Securing Affordable Energy for Generations Act, 2025 (Bill 40), the Lieutenant Governor in Council can establish eligibility requirements for data centres connecting to Ontario’s transmission or distribution grids. The Playbook affirms data centres as “critical infrastructure” and outlines how the government intends to evaluate data centre opportunities and attract investment to boost Ontario’s compute capacity.
• The Playbook’s three pillars. The new framework proposes three pillars to assess data centre proposals. Proposals will be assessed on the extent to which they: (1) advance economic development (e.g., job creation, tax revenue); (2) protect data security and digital sovereignty (including being “Canadian-owned and operated”); and (3) earn public confidence by investing in—and providing benefits to—local communities, and mitigating environmental impacts.
• New rate class for new data centres. Ontario is exploring the creation of a GA rate class for new data centres and eliminating their ability to participate in the Industrial Conservation Initiative (ICI) program, which allows large industrial and commercial customers to lower their electricity costs by reducing demand during peak hours. Existing data centres would still be able to take part in the ICI program, but must attest that they are “not mining cryptocurrency”.
• Timeline and next steps. The Playbook and rate class proposal are currently in draft form. Interested parties have until September 12, 2026, to submit feedback. Following consultation, Ontario will publish the final Playbook, supporting its AI Industrial Strategy expected to be released this fall.

Bill 40 and Ontario’s approach to data centres

As outlined in our previous bulletin, Bill 40 (passed in December 2025) made substantive amendments to key provincial legislation, including adding an “economic growth” mandate to the objectives of the Independent Electricity System Operator and the Ontario Energy Board. Critically for data centres, Bill 40 also overturned the key principle of “non-discrimination” that governs access to Ontario’s electricity grid. It authorizes the Lieutenant Governor in Council to prescribe, by regulation, eligibility requirements for “large load facilities” (i.e., data centres) seeking to connect to the grid, while also giving the Minister of Energy and Mines the power to approve connection requests.

While Bill 40 offered direction, regulatory details remained scarce until the Playbook’s release. The government’s prior indications through the 2025 Economic Statement and legislative comments suggested a strong preference for projects offering community benefits and economic competitiveness, and signalled that crypto-mining operations would not be prioritized³. The Playbook now provides the evaluative framework: a “whole-of-government effort to prioritize the right investments”, assessing proposals against grid capacity and strategic economic considerations⁴.

Ontario’s framing is supportive of data centre investment, outlining such projects as “critical infrastructure” to support Ontario’s AI economy and establish Canadian digital sovereignty. However, the Playbook makes it clear that support will be limited to non-financial supports: a clean and reliable grid, a skilled workforce, permitting facilitation, and white glove service. Proponents should not expect direct financial assistance and should model project economics accordingly.

The Playbook is anchored in three core principles:

1. Data centres must invest substantially, both financially and non-financially, in Ontario and local communities: Success for governments and Ontarians could include greater workforce participation and apprenticeship opportunities, access to additional compute for businesses, new community amenities, and critical infrastructure development.
2. Data centres pay the full cost of electricity: Success could include data centres investing in necessary generation and transmission upgrades, with other ratepayers not bearing the cost of data centres operating in their area.
3. Ontario will only offer non-financial support to attract data centre investments: Success would include Ontario providing a reliable electricity system, ample land space and skilled workforce with other non-financial support including “white glove service” and facilitating permitting⁵.

The Playbook’s three assessment pillars

The Playbook’s strategic priority assessment applies three pillars to proposals seeking grid connection, forming part of the broader regulatory approval process:

Pillar 1. Advance economic development

Here, Ontario will consider data centres that would create benefits for Ontario’s economy, including high-quality jobs, significant investment, new tax revenue for governments, and support for domestic supply chains (including local supplier participation), and would help Ontario SMEs become more productive and innovative, including through additional available compute capacity.

Pillar 2. Protect data security and digital sovereignty

Pillar 2 evaluates whether such projects advance Ontario’s or Canada’s control over sensitive and critical data and its digital infrastructure. This includes considering whether the project (i) aligns with policies regarding digital sovereignty, (ii) safeguards and advances Ontario’s security and cybersecurity objectives, and (iii) is preferably “Canadian-owned and operated”. This pillar also notes that the project should align with federal planning on digital sovereignty and residency.

Proponents should note the interplay between this pillar and the federal National Artificial Intelligence Strategy: AI for All, which encourages investment in sovereign compute. Projects that can demonstrate alignment with both provincial and federal sovereignty objectives—particularly those that are Canadian-owned and operated—are likely to be prioritized. However, the draft Playbook currently does not define “Canadian-owned” or specify an ownership threshold.

Pillar 3. Invest in communities and earn public confidence

The third pillar evaluates whether projects deliver “significant and meaningful” community benefits including local labour participation, workforce training, and community engagement, while minimizing strain on municipal technical and fiscal capacity (which refers to a community’s ability to assess a proposal’s alignment with zoning, standards, and financial impacts, as well as its ability to provide roads and expand water and sewer systems)⁶. This pillar also assesses how the project minimizes environmental impacts such as noise, water use, and air pollution. The Playbook suggests that this could be accomplished by implementing technologies such as closed-loop cooling to limit water use.

Ontario is seeking stakeholder feedback on the pillars, including how projects can demonstrate alignment and whether certain pillars should be given priority over others. Sector participants should consider responding to the consultation to shape how their particular project characteristics are valued in the final framework.

Data centres as a new rate class

With the release of the draft Playbook, Ontario also announced that it is considering amendments to Ontario Regulation 429/04 (the Regulation) to establish a data centre rate class for GA billing purposes. The objective of this proposal is for new data centres (above 1 MW) to pay a “higher rate than the industrial rate program for large electricity users”⁷, and to eliminate their participation in the ICI program, which encourages large industrial and commercial customers to reduce their demand during peak hours by investing in behind-the-meter solutions or entering into virtual corporate power purchase agreements.

The proposal would apply only to new data centres. Existing data centres would continue to be charged under the current framework, although those participating in ICI would be required to attest that they are not engaged in mining cryptocurrency. At this time, no details have been provided regarding the attestation process, or the activities that would be considered cryptocurrency mining for these purposes.

For new data centres, the elimination of ICI eligibility represents a potential increase in electricity costs that will have to be modelled into the project’s economics. For existing data centres in Ontario, the cryptocurrency attestation requirement will introduce a new compliance obligation that could affect ICI eligibility and, by extension, electricity cost exposure.

Next steps

Ontario is consulting on the draft Playbook and new rate class until September 12, 2026. Investors, utilities, and other interested parties should consider engaging in the consultation process to influence the final framework.

The draft regulation remains outstanding and will likely follow finalization of the Playbook. Proponents should consider structuring projects to satisfy the Playbook’s objectives in anticipation of the regulation incorporating requirements based on the three pillars.