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On June 3, the Government of Ontario introduced Bill 40, Protect Ontario by Securing Affordable Energy for Generations Act, 2025 ("Bill 40"). While Bill 40 has not received Royal Assent, industry participants should be aware of the proposed changes and the government's direction on both future energy growth objectives, hydrogen opportunities, and data centre connectivity.
"Economic Growth" Mandate
Bill 40 amends the Electricity Act and the Ontario Energy Board Act, codifying "economic growth" as a formal objective for the Independent Electricity System Operator ("IESO") and the Ontario Energy Board ("OEB"). If Bill 40 receives Royal Assent, both agencies will be statutorily required under their respective Acts to consider economic growth in their planning and regulatory processes. The agencies are to fulfill the objective of supporting economic growth "consistent with the policies of the Government of Ontario" thereby sending a clear policy signal that energy sector policy needs to be aligned with the government's priorities.
The amendments introduce an additional objective to the Electricity Act, specifically "to facilitate the development of a hydrogen market and economy in Ontario in order to support potential uses and applications of low-carbon hydrogen, including for purposes directly or indirectly connected to the electricity system or electricity sector, in a manner consistent with the policies of the Ontario Government". As a result, the IESO's mandate will be broadened to encompass responsibilities related to hydrogen development, including through the recently announced $30M Hydrogen Innovation Fund aimed at promoting hydrogen development.
Limitations on Foreign Participation in Ontario's Energy Sector
Bill 40 reinforces the Protect Ontario by Unleashing our Economy Act, 2025 and the Ontario government's Procurement Restriction Policy, all of which aim to restrict foreign participation in Ontario's energy sector.
On September 17, 2025, the government issued proposed regulation that would limit participation by foreign actors in Ontario's energy sector. The government is currently seeking feedback on the proposed regulation Protect Critical Infrastructure through Placing Limitations on the Procurement of Foreign Goods and Services and Participation of Foreign Entities in Ontario's Energy Sector.
On September 4, 2025 government proposed additional amendments to the Ontario Energy Board Act, which will allow the establishment of deferral or variance accounts that will record the costs required to comply with procurement restrictions that relate to the country, region or territory of origin. If passed, the amendments will allow rate regulated entities covered by the procurement restriction to track increased costs resulting from limited access to contracts from certain jurisdictions and have those costs reviewed by the OEB and potentially recovered through rates.
Powering Data Centres
The Ontario government is bolstering the development of data centres by the proposed addition of section 28.1 to the Electricity Act. This new provision will require specified load facilities, including data centers, to adhere to connection requirements established by regulation. These measures will enable the government to evaluate interconnection applications based on considerations such as economic impact, job creation, and energy intensity, thereby providing the opportunity to prioritize approval of connection requests from data center projects that serve the province's economic interests. Industry participants should remain tuned to any future announced regulations which further define a "specified load facility" or outline "specified connection requirements".
New Power for Chief Executive Officer of OEB
Bill 40 introduces a new section 13.1 to the OEB Act which authorizes the CEO to issue policies to commissioners and OEB employees regarding timelines for conducting a hearing, making a determination (if it is a decision of an OEB employee under delegated authority), information and document requirements and other matters that may be prescribed by regulation.
Opportunity and Consideration for Stakeholders
Bill 40 is currently in an open consultation period and industry participants are invited to submit comments on the Environmental Registry of Ontario's website, with comments due November 4, 2025.
Conclusion
If Bill 40 passes, it will likely drive energy sector growth in Ontario by enabling new transmission lines, data centres, and hydrogen projects. Many details will be determined through regulation and future policy, so stakeholders should stay alert for updates this month. The Power Group at McCarthy Tétrault is actively monitoring developments and opportunities relating to Bill 40. Please do not hesitate to reach out to your McCarthy Tétrault advisors for further information about these measures.
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