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On December 11, 2025, the Government of Ontario's Bill 40 - Protect Ontario by Securing Affordable Energy for Generations Act, 2025 ("Bill 40"), received Royal Assent and is now law. As we noted in our October posting on Bill 40, if passed, there would be significant amendments to the Electricity Act, 1998, the Ontario Energy Board Act, 1998 ("OEB Act") and the Municipal Franchises Act. Together, these changes embed economic growth explicitly into Ontario's energy regulatory framework and create new statutory tools to support infrastructure development, large electricity loads and system planning.
"Economic Growth" Mandate Embedded in Energy Regulation
"Economic growth in a manner consistent with the policies of the Government of Ontario" is now added as an objective to the OEB Act and to the purposes of the Electricity Act, 1998. This sends a clear policy signal that energy planning and regulation are expected to align more directly with broader provincial economic priorities.
Related amendments expand the factors the Ontario Energy Board (OEB) is required to consider in leave to construct applications under section 92 of the OEB Act. Section 96 now expressly includes economic growth as a public-interest consideration in major transmission and distribution project approvals.
The mandate of the Independent Electricity System Operator (IESO) has also been amended to include an explicit objective to support economic growth in a manner that protects the interests of consumers .
Hydrogen market development
Bill 40 introduces a new statutory purpose under the Electricity Act related to supporting the development of a hydrogen market and economy in a manner consistent with government policy. This amendment aligns the electricity statute with Ontario's broader energy transition and industrial strategy and provides additional legislative support for hydrogen-related initiatives.
New framework for large electricity loads, including data centres
One of the most closely watched elements of Bill 40 is the introduction of new section 28.1 of the Electricity Act, which allows the government to treat certain large electricity loads differently from the traditional non-discriminatory access regime.
Section 28.1 authorizes the government to establish, by regulation, "specified connection requirements" for "specified load facilities," including data centres meeting prescribed criteria. Where applicable, transmitters and distributors are prohibited from connecting or reconnecting such facilities unless those requirements are satisfied.
In September 2025, the Ministry of Energy and Mines posted a proposed regulation that would require covered data centre projects to obtain approval from the Minister of Energy and Mines before connecting to the provincial electricity grid, with the ability to prioritize projects based on economic, strategic, security and local community benefits. That proposal remains under consideration, with the comment period having closed prior to Bill 40 receiving Royal Assent.
Transmission cost recovery flexibility
Bill 40 adds new section 78.3 to the OEB Act, enabling the government to make payments to transmitters out of money appropriated by the Legislature. This provides a statutory mechanism to shift certain transmission project costs from ratepayers to taxpayers where doing so aligns with broader policy objectives, including economic growth, infrastructure development and system expansion in high-growth areas.
Foreign participation in the energy sector
Bill 40 also reinforces the government's authority to restrict foreign participation in Ontario's energy sector, as prescribed by regulation. This complements earlier legislative changes that provide enabling authority to limit foreign procurement, ownership or participation where necessary to protect provincial interests.
Municipal Franchises Act amendments
Finally, Bill 40 modernizes the Municipal Franchises Act by expanding the authority of the OEB to grant orders renewing or extending rights not only to operate gas distribution systems, but also to construct, extend or add to gas distribution works.
The amendments also streamline the municipal franchising process by replacing the requirement for a municipal elector vote with approval by municipal council by-law, reducing procedural friction for gas infrastructure development.
Looking ahead
With Bill 40 now in force, attention will shift to implementation, particularly the development of regulations under section 28.1 of the Electricity Act and any further measures addressing foreign participation and procurement. These steps will be critical in determining how the new statutory framework is applied in practice, especially for data centres, large industrial loads and major infrastructure projects.
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