Across Canada, and globally, electrification, data centres, and clean technology such as direct air carbon capture are driving massive increases in electricity demand and interest in innovative supply arrangements, forcing regulators to respond. We have previously described some of these challenges in relation to data centres.1
Across all sectors, surging demand, particularly for clean power, is straining electricity grids, potentially exceeding their capacities, and also raising questions as to what supply arrangements are allowed within current regulatory frameworks. Issues with interconnection, transmission capacity, and power supply are national and international concerns. In June 2025, in Ontario and Alberta, there were four representative developments in these areas. Regulators and governments in these provinces placed limitations on data centre access to power and changed policies on self-generation and virtual procurement of renewable energy:
- Alberta
- The Alberta Utilities Commission (AUC) ruled that on-site, self-supplying, generation cannot be located on multiple parcels separated by roads and railways. This decision is currently under appeal.
- The Alberta Electric System Operator (AESO) placed a 1,200 megawatt (MW) cap on the connection of large load connections, such as data centres, until 2028.
- Ontario
- The Ontario government created new regulations to govern the connection of large loads such as data centres.
- The Ontario government and Ontario Independent System Operator (IESO) created a new program to allow a form of Virtual Power Purchase Agreement (VPPA) for certain industrial power consumers in Ontario, creating an opportunity for the province to participate in a growing corporate clean power market.
Alberta
The Commission's Decision on the Coaldale Renewable Energy Project
In Alberta, power generation is privately owned but all power generated must be sold to the provincial grid, and all consumers must buy from the same common pool, with some limited exemptions. Those exemptions include ones allowing customers to self-supply, generating their own power themselves on their own property.
The Coaldale Renewable Energy Project (Coaldale Project) is a test of the extent of those self-supply exemptions. The Coaldale Project is a wind and solar plant proposed to be built by Coaldale Renewables GP Inc. (Coaldale) on private land owned by McCain Food Limited (McCain). McCain is to purchase all the electricity generated by the Coaldale Project and then export unused electricity to the Alberta Interconnected Electricity System (AIES).
On June 3, 2025, the Commission ruled on a preliminary module in its hearing on the Coaldale Project, which addressed solely whether the arrangements to sell electricity directly to McCain were acceptable under the exemptions governing self-supply. The Commission found that the Coaldale Project would not fit in those exemptions in two ways.
First, the Commission considered the self-supply exemption in s. 2(1)(b) of the Electric Utilities Act (EUA). This exemption allows generators to self-supply on-site load while also exporting to the AIES, behaviour that is usually prohibited. The Commission found that in order to use this exemption, generation and the load it is serving have to at least be on contiguous properties. The properties on which the Coaldale Project was located were separated from each other and from McCain's food processing facilities by roads and railways and so did not qualify.2
Second, the Commission considered the Coaldale Project collector lines. Collector lines are a common part of renewable power plants located across several parcels.3 However, private distribution lines are only allowed in strictly limited circumstances under the Hydro and Electric Energy Act (HEEA).4 These limitations preserve the role of public distribution companies while allowing customers to distribute power to self-supply on their own property.5 The Coaldale Project collector lines delivered electricity directly to a customer, McCain, and were not limited to McCain's property, and so were an improper distribution system.6
Considering it met neither self-supply exemption, the Coaldale Project was denied.7
Coaldale and McCain have applied for a review and variance of,8 and for permission to appeal, the AUC's denial.
The Alberta Electric System Operator's New Approach to Connection Loads and Self Supply
The AESO has the responsibility to ensure that connections to the AIES do not compromise the AIES' reliability. In recent years, there has been a surge in connection requests for data centres – 11,879 MW of requested load as of 2025, almost as much as the total current peak demand on the AIES, or total size of Alberta's electricity load, of 12,219 MW.9
In March 2025, the AESO announced a new process to address these challenges. This included requiring new information on facility and operating details from data centres seeking to connect, new technical requirements, and developing a long-term framework including transmission planning changes and potentially different electricity rates in the AESO tariff for data centres. Most importantly, the March update indicated that the AESO would cap new data centre connections.10
On June 4, 2025, the AESO did exactly that, capping new data centre connections at 1,200 MW, approximately 10% of requested connections, until 2028, as an "interim" measure.11 This cap is set at a level where transmission system reinforcements or upgrades are not required. The cap applies to all load projects greater than 75 MW and allocates the power under the cap as follows:
- Project qualification is based on municipal support, financial security, and completed power flow studies; and
- Pro-rata assignment of available capacity among qualified developers to promote fairness and efficiency.12
The AESO has stated that these measures are interim while it develops solutions that will allow for data centre construction in the province without compromising grid reliability.13
Ontario
Bill 40, Protect Ontario by Securing Affordable Energy for Generations Act
Ontario is facing similar, though smaller-scale, challenges to Alberta from the surge in data centre connection requests. Dozens of new data centre projects representing up to 6,500 MW of demand are seeking to connect to Ontario's grid, nearly 30% of peak demand for the province.14
In response to these challenges, on June 3, 2025, the government of Ontario introduced Bill 40, the Protect Ontario by Securing Affordable Energy for Generations Act, 2025, which amends the Electricity Act, 1998, the Municipal Franchise Act and the Ontario Energy Board Act, 1998.15 While there are many significant amendments in Bill 40, for data centres the most significant is the addition of Section 28.1 to the Electricity Act, 1998.16 This section creates the framework to require that high-demand load facilities, such as data centers, meet requirements to be specified in future regulation in order to be connected or reconnected to the grid. These requirements can include criteria regarding economic development and job creation, or other factors the Lieutenant Governor in Council considers necessary or advisable.
O. Reg. 429/04, Adjustments Under Section 25.33 of the Act – Corporate Power Purchase Agreements
For the past three years, Ontario has been developing a framework to allow VPPAs in its electricity market, to meet demand for clean power VPPAs from corporate purchasers. On June 12, 2025, O. Reg. 429/04, Adjustments Under Section 25.33 of the Act (GA Regulation) under the Electricity Act, was amended, following a stakeholder consultation period in 2023.17 The amended regulation allows participants in the Industrial Conservation Initiative (ICI), commonly referred to as Global Adjustment Class A customers, to access clean electricity through Corporate Power Purchase Agreements (C-PPAs).
C-PPAs function like VPPAs, allowing qualifying customers to financially settle for non-emitting electricity. This non-emitting electricity can be used to offset the consumer's demand during peak periods, helping, in most instances, to reduce the Global Adjustment charges. Global Adjustment charges often form the largest part of a consumer's electricity bill. C-PPAs can be formed with non-emitting generators located anywhere in the province, as long as both parties are market participants, and battery storage is not eligible.18 Because only Class A customers are eligible, most small consumers, such as retail stores, will not be able to use the C-PPA program.19 The IESO is still developing the details of the C-PPA program.
Footnotes
1. Power Surge: Legal Landscape of Data Centre Development in Canada | Cassels.com
2. AUC Decision 29294-D01-2025, June 3, 2025, paras 14-15.
3. AUC Decision 29294-D01-2025, June 3, 2025, para 19.
4. AUC Decision 29294-D01-2025, June 3, 2025, para 22.
5. AUC Decision 29294-D01-2025, June 3, 2025, para 22.
6. AUC Decision 29294-D01-2025, June 3, 2025, para 23.
7. AUC Decision 29294-D01-2025, June 3, 2025, para 27.
8. AUC Proceeding 30153, Coaldale Renewables GP Inc. and McCain Foods Limited Application for Review and Variance of Alberta Utilities Commission Decision 29294-D01-2025, June 3, 2025, July 3, 2025.
11. AESO Announces Interim Approach to Large Load Connections » AESO
12. AESO Announces Interim Approach to Large Load Connections » AESO
13. Opinion: Don't panic: AESO data centre limits are a red herring | Calgary Herald
14. Ontario, Energy and Mines, "Ontario Securing Affordable Energy for Future Generations", June 3, 2025, online: Ontario Securing Affordable Energy for Future Generations | Ontario Newsroom
16. Bill 40, s. 7.
18. New Corporate Power Purchase Agreements for Industrial Conservation Initiative Participants
19. New Corporate Power Purchase Agreements for Industrial Conservation Initiative Participants
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