The Protect Ontario by Securing Affordable Energy for Generations Act, 2025: key takeaways and next steps on Ontario’s new energy law

On December 11, Ontario’s Bill 40, Protect Ontario by Securing Affordable Energy for Generations Act, 2025 (the Act), received royal assent and became law. Building on Ontario’s Integrated Energy Plan (IEP), the legislation introduces several changes to existing energy legislation, including new emphasis on economic growth and job creation. Sector participants should be aware of these new changes and monitor forthcoming regulations on data centre connectivity and other emerging energy priorities.

What you need to know

• Key changes: Bill 40 enacts several changes to existing energy legislation. As outlined in our previous bulletin on Bill 40, these changes include:
  • Codifying “economic growth” as a new objective for the Independent Electricity System Operator (IESO) and the Ontario Energy Board (OEB) to consider in their planning and regulatory processes.
  • Creating an exception to the principle of “non-discrimination” in Ontario’s electricity system, detailing new regulation-making authority to establish data centre connectivity requirements to which data centres must adhere before connecting to the grid.
  • Allowing certain rate-regulated entities to establish a deferral or variance account to record costs incurred in complying with potential regulations limiting foreign participation in the sector.
• Forthcoming regulations: The Act will be implemented through regulations introduced under the Minister’s new authority, including those addressing “specified load facilities”, foreign participation restrictions, and guidance for the OEB on how rate-regulated entities will recoup costs associated with a foreign participation restrictions regulation. The degree to which the Act will affect Ontario energy sector participants cannot be fully assessed until these regulations are introduced.

Key takeaways

New mandates related to “economic growth” and the development of a hydrogen market in Ontario

“Economic growth” is codified as a formal objective for the IESO and the OEB. Both agencies will be statutorily required under the Electricity Act, 1998 (the Electricity Act) and the Ontario Energy Board Act, 1998 to consider this objective in their planning and regulatory processes respectively (in the case of the OEB, as it relates to its role in regulating the electricity sector). The amendments also add a new purpose to the Electricity Act and a corresponding new mandate for the IESO to facilitate the development of a hydrogen market and economy in Ontario. This change builds off the IEP, which highlighted hydrogen as a “strategic resource”, and aligns with the IESO’s recently-announced $30M call for applications under its Hydrogen Innovation Fund.

In response to its expanded mandate, the OEB’s CEO announced in a December 16 letter that the regulator has amended certain filing requirements for electricity distribution cost-of-service and transmission leave-to-construct applications to reflect the new objective as an initial step. OEB staff are also considering a framework for understanding economic growth, which would include thinking about indicators such as “job creation, contributions to the local economy, development of supply chains and linkages with other Ontario industries”¹.

Data centre connection requirements to be set out in forthcoming regulation

The Act creates an exception to the principle of “non-discrimination” in Ontario’s electricity system. New section 28.1 of the Electricity Act details that transmitters or distributors shall not connect (or reconnect) a “specified load facility” (e.g., a data centre) onto the transmission or distribution system unless connection requirements that are specified in the regulations are met.

Ontario has not yet released draft regulation under the Act. However, on September 5, Ontario posted a Notice on the Environmental Registry of Ontario seeking feedback on what a proposed data regulation could look like, with the comment period having closed on November 4². The Notice indicated that future regulations would empower the Minister of Energy and Mines “to prioritize and approve connection requests from data centre projects that serve the province's economic interests” and require ministerial approval before data centres can connect to the grid. Stakeholders were asked ten wide-ranging questions on the regulation, including the types of data centres that would be subject to the requirement, their electrical connection size (e.g., greater than 50 megawatts) and geographical area (e.g., areas where there is surplus or constrained capacity). Other questions focused on the design of the approval process, timelines for evaluating connection requests, what local benefits should be considered in prioritizing projects and whether to adopt a distinct electricity rate class for large data centres.

In both introducing the Act and in its 2025 Economic Statement, Ontario has emphasized the importance of data centres that strengthen the province’s digital economy, support local data storage and domestic hosting, and create jobs. The government stated that it will “prioritize approvals for data centres that deliver measurable benefits to both local communities and to the province’s long-term competitiveness”³. Conversely, government statements made in legislature indicate that data centres used for crypto-mining or bitcoin are not among those that the province intends to prioritize.

Foreign participation restrictions and cost-recovery mechanisms for rate-regulated entities

The Act will support the restriction of foreign participants in Ontario’s energy sector: a measure which was first introduced in the Protect Ontario by Unleashing our Economy Act. The Act allows rate-regulated OEB licensees (such as electricity distributors, transmitters and generators other than the IESO and OPG) and rate-regulated gas entities (including distributors, transmitters or storage companies) to establish cost-recovery mechanisms (i.e., deferral or variance accounts) to record costs incurred in complying with potential regulations limiting foreign participation in the sector.

The Protect Ontario by Unleashing our Economy Act introduced directive and regulation-making authority to impose procurement-related restrictions based on the origin of goods or services procured by certain energy sector participants. While no draft regulation limiting foreign participation has been released, the Ministry of Energy and Mines (the Ministry) sought feedback on developing regulations in September, with the comment period having closed on October 26⁴. In its consultation, the Ministry indicated that it is considering limitations on certain foreign actors that pose a threat to Ontario’s energy infrastructure, providing examples of possible regulations including restrictions on procurement or foreign ownership of strategic assets, and establishing preferential criteria and scoring for Canadian proponents in energy sector procurements. The Ministry also requested input on how these limits could impact costs, lead times and resource availability for procurements, as well as insights into goods and services with no alternative supply chains. It stated that future regulations are expected to “increase compliance costs on both regulated entities and their suppliers who will need to ensure compliance with procurement limitations”⁵.

In September, the Ministry stated the deferral or variance account would “track increased costs stemming from limited access to contracts from certain jurisdictions” and that those costs would be reviewed by the OEB for potential recovery through rates⁶. The Act grants the OEB the authority to determine how such collected amounts will be reflected in rates, subject to prescribed regulations. No text of a proposed regulation has yet been published.

New powers for the OEB’s Chief Executive Officer

The Act enhances the role of the OEB’s Chief Executive Officer to issue internal procedural policies to OEB commissioners and staff, including timelines for conducting a hearing and making a determination. Commenting on the new legislation, the OEB CEO described these new powers as a “critical tool to ensure government policy is considered in deciding applications before the OEB, and that adjudicative matters are dealt with efficiently and effectively”⁷.

Next steps

The impact of the Act—and related legislation, such as the Protect Ontario by Unleashing our Economy Act—will ultimately depend on how it is implemented through forthcoming regulations. To date, no regulations have been published under the Minister’s new authority. However the government has sought feedback on developing potential regulations addressing data centre connectivity requirements and regulations that may limit foreign participation in Ontario’s energy sector. Energy participants should assess the implications of the Act and review any future proposed regulations.