Ontario to Develop New Rules for Connection of Large Data Centres

In June 2025, the Government of Ontario introduced Bill 40, titled Protect Ontario by Securing Affordable Energy for Generations Act, 2025. The aim of the new legislation is to amend existing energy statutes (including the Electricity Act, 1998 and the Ontario Energy Board Act, 1998) to encourage economic growth in the province’s energy sector.

Underpinning this effort are Ontario government energy policy documents such as October 2024’s Ontario’s Affordable Energy Future: The Pressing Case for More Power and June 2025’s Energy for Generations integrated energy plan, each of which sets out plans to address Ontario’s forecast growth in electricity demand driven by electrification, housing growth and data centres.

One specific area of focus in the new legislation concerns the development of data centres. The press release accompanying the release of Bill 40 (Ontario Securing Affordable Energy for Future Generations | Ontario Newsroom) stated:

Current legislation requires utilities to connect all data centres indiscriminately, regardless of economic impact or energy intensity. As electricity demand grows into the 2040s, the government is creating an authority to prioritize projects that maximize benefit to the Ontario economy and workforce. This includes projects that create high-quality jobs, strengthens Ontario’s digital economy and support domestic data housing – ensuring Canadian data stays in Canada, protected from misuse and weaker foreign privacy regimes.

From the perspective of data centre development, two items are of particular interest in Bill 40.

First, the energy statutes will add a new “economic growth” mandate for the Independent Electricity System Operator (“IESO”) and the Ontario Energy Board (“OEB”). Both the IESO and the OEB will be required by their respective governing statutes to consider the objective of “economic growth” in their planning and regulatory processes. The preamble to the new legislation states that the Government of Ontario is committed to “supporting the responsible growth of energy-intensive industries like data centres that align with Ontario’s economic priorities and benefit local communities.”

Second, the Electricity Act (and related regulations) will be amended to prescribe rules for the connection of new larger data centres. A new section of the Electricity Act would direct that transmitters or distributors shall not connect (or reconnect) a “specified load facility” (e.g., data centre as defined in regulations) onto the transmission or distribution system unless connection requirements that are specified in the regulations are met. 

Bill 40 is currently at the initial legislative stage. It was introduced in the legislature before the summer break and will be debated further when the legislature resumes in October 2025. It is expected that the legislation will be passed relatively quickly. It will then take some time before draft (or final) regulations are published, setting out the definition of which data centres are subject to the new rules (presumably it will be larger facilities) and outlining the connection requirements for them.

Work is apparently underway on the regulations to support Bill 40. On September 5, the Ontario government posted a notice (New Requirements for Data Centres Seeking to Connect to the Electricity Grid in Ontario | Environmental Registry of Ontario) seeking input into the types of considerations that should be included in the supporting regulations that will prescribe the rules around connection of new large data centres in Ontario.

The specific questions on which input is sought are as follows:

The government is seeking input on the types of data centres that would be subject to the proposed requirement, including the electrical connection size (e.g., greater than 50 megawatts) and geographic area where there could be surplus or constrained connections for electricity, of the prospective developments.

Apart from input on proposed connection size and geographic area, the Ministry of Energy and Mines is seeking stakeholder input on the following questions:

1. Do you support the proposal to prioritize electricity connections for data centres that demonstrate economic, strategic, security and local community benefits?
2. What criteria should be used to define a data centre that supports Ontario’s economic and data sovereignty interests?
3. How can the approval process be designed to be efficient, transparent and predictable, while still allowing Ontario to prioritize beneficial projects?
4. What timelines would be reasonable for evaluating and approving data centre connection requests?
5. How can the government balance the electricity needs of data centres with those of other energy-intensive industries (e.g., manufacturing, mining, etc.)?
6. What types of local benefits (e.g., employment, tax revenues, infrastructure investments, etc.) should be considered in prioritizing data centre approvals?
7. What is the cost to prospective data centres for requesting to connect to the electricity grid (e.g., cost to complete system and connection impact assessments)?
8. What policy or pricing mechanisms could be implemented to ensure that large electricity users, particularly those that necessitate system expansion, contribute a greater share of infrastructure costs while ensuring the materialization of demand (e.g., letters of credit, etc.)?
9. Do you support the adoption of a distinct electricity rate class, specifically for large data centres?
10. What types of policy tools or incentives could be introduced to encourage the development of data centre projects in northern Ontario?

These questions give some indication of the types of factors and items that will ultimately be included in the new rules for connection of data centres. The Ontario government’s consultation runs to November 4, after which time we will presumably see the draft or final regulations relevant to connection of large new data centres.