Articles

Connecting growth: Housing policy, energy infrastructure and the evolving role of the OEB

Authors:  and * | October 2025 – Volume 13, Issue 3, 2025

INTRODUCTION

For many years, the Ontario Energy Board (“OEB”) has grounded its oversight of energy infrastructure and regulation in a set of core principles which include consumer protection, affordability, safety, reliability, and the fair return standard for utilities. These principles, reflected in the Ontario Energy Board Act, 1998 (the “OEB Act”), have long served as the foundation of the OEB’s regulatory mandate. When operating independently, the OEB has historically adhered to this framework, focusing on economic regulation and the public interest.

However, at key moments, government policy has intervened to expand the Board’s focus and introduce new priorities. One such moment was the introduction of the Green Energy and Green Economy Act, 2009 (the “GEA”), which shifted the OEB’s attention toward conservation and the enablement of renewable energy.[1] The GEA amended the OEB Act to include the promotion of renewable energy and conservation within the Board’s objectives, requiring it to integrate environmental considerations into its decisions, a departure from its traditional economic lens. The OEB was tasked with facilitating renewable energy connections, overseeing cost recovery for the Feed-in Tariff program, and adjusting its regulatory codes to support the government’s green energy agenda. Although the Green Energy and Green Economy Act was repealed, effective in 2019, many of its conservation and renewable energy objectives remain embedded in the OEB’s regulatory codes and processes, continuing to shape how the Board evaluates infrastructure, system planning, and demand-side initiatives.[7]

Today, Ontario is experiencing a similarly significant moment of policy intervention, this time driven by the government’s focus on housing affordability and growth. In response to a province-wide housing crisis, the Ontario government has introduced a suite of legislative and policy measures aimed at accelerating development, including the More Homes, More Choice Act, 2019, the More Homes for Everyone Act, 2022, and the More Homes Built Faster Act, 2022.[3] These initiatives have been accompanied by strong mayor powers, housing targets, and financial incentives, all of which signal a clear policy direction: to remove barriers to housing construction, including those related to energy infrastructure.

The OEB has been called upon to respond. Ministerial Letters of Direction issued in 2023 and 2024 instructed the Board to align its regulatory processes with the government’s housing objectives, including by reviewing connection cost policies, extending revenue and connection horizons, and streamlining approvals for system expansions.[4] These letters of direction have already resulted in substantive changes to the Distribution System Code (“DSC”), the development of a new Capacity Allocation Model (“CAM”), and the introduction of new cost allocation rules for electricity system expansions.[5]

This shift is not merely rhetorical, it is being codified through legislative amendments, regulatory code changes, and appointments to the OEB’s Board of Directors. The Keeping Energy Costs Down Act, 2024, for example, reversed a major OEB (EB-2022-0200) that had reduced the revenue horizon for natural gas infrastructure to zero, and instead restored the 40-year horizon through ministerial authority.[6] The Act also introduced new powers for the Minister of Energy to direct the OEB to hold hearings on matters of public interest and to set revenue horizons by regulation.[7]

This article explores how the government’s housing priorities have come to shape the OEB’s regulatory approach. It examines the Enbridge Phase 1 decision, the legislative response through the Keeping Energy Costs Down Act, and the resulting evolution in the OEB’s role and regulatory tools.

1. POLICY CONTEXT: ONTARIO’S HOUSING PUSH

The Ontario government’s housing policy agenda has evolved rapidly over the past decade in response to mounting affordability challenges, population growth, and infrastructure constraints. Between 2019 and 2025, the province introduced a suite of legislative initiatives to address housing supply and affordability.

The More Homes, More Choice Act, 2019 aimed to streamline development approvals by reforming the Planning Act and Development Charges Act to expedite housing construction. It emphasized building “the right homes in the right places” as part of a multi-year strategy to alleviate the housing crisis.[8]

In December of 2021, the Ontario government announced the creation of a Housing Affordability Task Force to “explore measures to address housing affordability, including increasing the supply of market housing, reducing red tape and accelerating timelines, and supporting economic recovery and job creation.”[9] The Task Force released its report in February 2022 concluding that average home prices in the province had increased by 180% over the past decade, while incomes had grown by only 38 per cent.[10] The report stated that the root cause of the housing crisis was a lack of supply and recommended reforms, including:

  • Setting a provincial target of 1.5 million new homes over 10 years.
  • Increasing density in urban areas and near transit.
  • Removing exclusionary zoning rules.
  • Limiting public consultations and appeals that delay projects.
  • Creating an Ontario Housing Delivery Fund to reward municipalities that meet housing targets.[11]

The Ontario government introduced legislation in response to the Task Force’s recommendations:

  • More Homes for Everyone Act, 2022: Building on the reforms from the More Homes, More Choice Act, 2019, this Act introduced further amendments to housing and development statutes. It established a Housing Supply Working Group to coordinate efforts across federal, provincial, and municipal levels as well as industry and associations. The Act also introduced penalties for municipalities that failed to meet housing targets and sought to make the development process more transparent and predictable.[12]
  • More Homes Built Faster Act, 2022: This legislation implemented the Task Force’s target of building 1.5 million homes over 10 years. It proposed sweeping changes to zoning, development charges, and environmental approvals.[13] The Act promoted intensification near transit, reduced bureaucratic delays, and encouraged public-private partnerships between municipalities, the private sector, not-for-profits and the federal government to accelerate construction.[14] It also targeted streamlining development approvals, including infrastructure such as water and electricity connections.[15]
  • Strong Mayors, Building Homes Act, 2022: This Act gave Toronto and Ottawa mayors the power to veto council decisions that conflicted with provincial priorities. These priorities include the target of 1.5 million new residential units by 2031 and supporting infrastructure like transit, roads, utilities, and services.[16] In 2025, these powers were extended to 169 more municipalities to expedite housing and infrastructure projects.[17]

The Ontario government’s housing policy priority during this time was reflected in the Minister of Energy’s direction to the OEB. While the 2022 Letter of Direction to the OEB emphasized broader considerations of electrification, energy transition and enhancing resiliency and preparing for the adoption of EVs, by 2023 the Minister of Energy specifically noted the OEB’s role in achieving the government’s new housing target.[18] In the November 2023 Letter of Direction, the Minister of Energy emphasized the importance of ensuring that Ontario’s electricity and gas transmission and distribution systems support the government’s housing goals. The Minister highlighted the need for timely decision-making, scrutinized costs, and a regulatory environment with certainty for proponents. The letter encouraged the OEB to review infrastructure unit costs and potential models for cost recovery to keep costs low and avoid barriers to growth. Additionally, the Minister requested a review of the connection and revenue horizon to balance growth and ratepayer costs appropriately.[19]

A. Comparative Horizons: Electricity vs. Natural Gas Connections

At the time the OEB initiated its review, a key regulatory distinction that had influenced infrastructure investment and cost allocation in Ontario was the different treatment of connection and revenue horizons across utility sectors. These parameters, used in economic feasibility tests, determine how long utilities expect to recover capital costs from new customers and how much risk is borne by ratepayers versus developers.

Electricity distributors, governed by the DSC, have historically applied a five-year customer connection horizon and a 25-year revenue horizon.[20] These relatively short timeframes result in higher upfront capital contributions from developers, particularly for early movers, and are designed to minimize risk to existing ratepayers. Developers have raised concerns that this approach disproportionately burdens initial customers while allowing later entrants to benefit from infrastructure without equivalent contributions.[21]

In contrast, natural gas distributors have historically operated under the E.B.O. 188 framework, which allows for a 10-year connection horizon and a 40-year revenue horizon.[22] Moreover, gas distributors can assess economic feasibility on a portfolio basis, blending profitable and less profitable projects to maintain an overall profitability index (PI) of 1.0.[23] Individual projects may proceed with a PI as low as 0.8, provided the portfolio remains viable. This flexibility enables cross-subsidization and reduces the need for upfront contributions, facilitating broader system expansion.[24]

In response to the Minister’s Letter of Direction, in April 2024 the OEB launched a consultation to engage stakeholders on the connection and revenue horizon issue.[25]

2. ENBRIDGE PHASE 1 DECISION: A REGULATORY TURNING POINT

In December 2023, the OEB issued a decision in phase 1 of Enbridge Gas Inc.’s (“Enbridge”) 2024 rate application. This was Enbridge’s first rebasing since the 2019 amalgamation of Enbridge Gas Distribution Inc. and Union Gas. In its decision, the majority of the Board reduced the revenue horizon for new natural gas connections from the standard 40 years to zero, effective January 1, 2025.[26] At 40 years, it allowed developers to connect homes with little or no upfront cost, while the long-term infrastructure costs were gradually recovered from ratepayers through rates. The Board found that the traditional 40-year horizon was no longer appropriate given the accelerating energy transition and the increasing likelihood that customers may leave the gas system before the end of that period.[27]

The majority of the Board held that the 40-year revenue horizon created a “split incentive” problem.[28] Developers were not exposed to the long-term risks or costs of gas infrastructure, while future homeowners and ratepayers would bear the burden. By requiring full cost recovery upfront, the Board’s stated aim was to ensure that developers make more informed decisions, potentially opting for all-electric developments that align with decarbonization goals and reduce long-term system costs.[29]

The Board was not unanimous in its decision. One commissioner dissented from the majority’s decision to adopt a zero-year revenue horizon, arguing that the evidentiary record did not support such a drastic change and that a 20-year horizon would better balance risk mitigation with regulatory continuity.[30] The dissent emphasized that zero is not a “horizon” in any meaningful sense and is inconsistent with the principles of the OEB’s own guidelines for assessing natural gas expansion in Ontario, which envisioned a contribution model and not a full upfront payment.[31] The dissent also noted the absence of developer input in the proceeding and warned of unintended consequences, including feasibility concerns for all-electric developments and potential strain on electricity infrastructure.[32] The dissent advocated for a more incremental approach, suggesting that a 20-year horizon would still significantly reduce stranded asset risk while preserving flexibility for future adjustments.[33]

The decision marked a significant departure from past practice and signaled a more assertive role for the OEB in managing the energy transition. It also raised broader questions about the regulator’s mandate. Should the OEB prioritize long-term decarbonization, or should it focus on affordability and access in the short term? The Enbridge decision forced a reckoning with these competing imperatives and set the stage for a political response.

3. LEGISLATIVE RESPONSE: KEEPING ENERGY COSTS DOWN ACT

The provincial government responded swiftly to the OEB’s decision. The Minister of Energy issued a response condemning the OEB’s decision to reduce the revenue horizon to zero the day after the decision was released, citing concerns that it would increase the price of new homes and limit customer heating choices.[34] The Minister vowed to reverse the OEB’s decision.[35]

In early 2024, the provincial government introduced the Keeping Energy Costs Down Act, a legislative package designed to reverse the Board’s Enbridge ruling and reassert political control over energy infrastructure policy.[36] The Act restored the 40-year revenue horizon for natural gas connections and granted the Minister of Energy new powers to direct the OEB’s activities.

The government framed the legislation as a necessary intervention to protect housing affordability and consumer choice. The Minster of Energy argued that the OEB’s decision would increase the cost of new homes by tens of thousands of dollars, undermining the province’s goal of building 1.5 million homes over the next decade.[37]

The Keeping Energy Costs Down Act introduced several key changes:

  • It amended the Ontario Energy Board Act, 1998 to allow the government to set revenue horizons by regulation.
  • It granted the Minister of Energy authority to issue directives requiring the OEB to hold generic hearings on matters of public interest.
  • It temporarily shifted jurisdiction over revenue horizon decisions from the OEB to the government, with the expectation that authority would revert to the Board by no later than January 1, 2029.[38]

The Act also included provisions to ensure that the OEB considers a broader range of public interest factors in its decisions, including housing affordability, economic development, and energy access.[39] The legislation was designed to align regulatory decisions with the government’s broader policy objectives and to prevent future rulings that could derail housing or infrastructure priorities.[40]

The Enbridge Phase 1 decision represented a notable shift in regulatory approach, prompting a swift legislative response that highlighted the evolving relationship between energy regulation and the government’s housing policy objectives.

4. REGULATORY REFORM AND POLICY ALIGNMENT: DSC AMENDMENTS AND THE CAPACITY ALLOCATION MODEL

In response to the Minister’s previous letters of direction and legislative developments , the OEB launched a series of consultations and policy reforms aimed at modernizing the regulatory framework for electricity distribution. These efforts culminated in a set of amendments to the DSC and the development of a new Capacity Allocation Model (“CAM”).

A. DSC Amendments

In June 2024, the OEB reported to the Minister of Energy from its consultations that there was general stakeholder support for extensions to connection and revenue horizons to reduce burden on first mover developers and ensure cost distribution is fair.[41] However, distributors seemed to highlight potential challenges that may arise in terms of financial implications of extending the horizons.[42] The OEB proposed:

  • New provisions for the DSC to clarify for distributors and customers how extended connection horizons beyond the standard five years should be employed.
  • Extending the revenue horizon used in the evaluation of expansion projects to recognize the life of assets used in connecting and serving residential customers.
  • To develop new DSC provisions for a capacity allocation model that specifically addresses multi-year, multi-party developments and ensures a fair allocation of costs between connecting parties.[43]

The Minister of Energy endorsed the OEBs recommendations and agreed to extend the maximum revenue horizon in the DSC for residential developments from 25 to 40 years.[44] The Minister stated that the amendments should reduce the expansion costs for homebuilders and make housing more affordable, while ensuring that burdens are not placed on ratepayers. The Minister also recommended that the OEB consider extending the connection horizon for housing developments from five to 15 years.

In November 2024, the OEB issued a proposal to amend the DSC to:

  • Extend the connection horizon for qualifying housing developments to a maximum of 15 years.
  • Extend the revenue horizon for all residential customers to 40 years.[45]

These changes were finalized in December 2024 and came into force in March 2025.[46]

B. 2024 Minister of Energy’s Letter of Direction

In December 2024, the Minister of Energy’s Letter of Direction to the OEB reinforced the government’s housing and affordability priorities.[47] Whereas the 2023 Letter of Direction letter emphasized the need for Ontario’s electricity and gas transmission and distribution systems to support the province’s goal of building 1.5 million new homes, the December 2024 letter went further. It referenced the Keeping Energy Costs Down Act and called on the OEB to implement regulatory and process changes that would support housing development, economic growth, and energy affordability. Specifically, the Minister directed the OEB to:

  • Amend the Distribution System Code (“DSC”) to extend the connection horizon for new electricity distribution lines to a maximum of 15 years.
  • Establish a capacity allocation model (“CAM”) for multi-phased housing development projects by March 2025.
  • Provide specific guidance to local distribution companies (“LDCs”) on implementing these changes. [48]

The letter also emphasized the importance of reducing the cost burden on first-mover developers and ensuring that infrastructure investments are aligned with Ontario’s growth objectives. It called on the OEB to maintain practices of innovation, sustainability, and accountability while supporting the province’s housing and energy goals.[49]

C. Capacity Allocation Model

The OEB developed the CAM to address issues related to system expansions for large and multi-developer residential projects.[50] This CAM ensures that developers who connect first pay a fair share of the costs, while those who connect later will contribute based on their allocated share of the new facilities. The current DSC mandates that a distributor allocate the costs of distribution facilities among multiple customers based on the apportioned benefit. However, what is not addressed is how such an allocation would function in scenarios where there is an extended connection horizon and potentially several years between connections by different customers/developers.[51]

The CAM was designed to:

  • Provide a fair and sustainable model for allocating infrastructure costs among developers, ratepayers, and distributors.
  • Facilitate expansion planning and ensure that capacity is allocated efficiently.
  • Align cost allocation with the benefits received by different stakeholders.[52]

The CAM was developed through a stakeholder advisory group and was informed by feedback from developers, distributors, and municipalities. It was finalized in June 2025 and is scheduled to come into force in September 2025.[53]

The DSC amendments and the CAM represent a significant evolution in the OEB’s approach to system expansion, incorporating more integrated planning practices intended to support housing development while addressing cost allocation and affordability considerations.

5. OEB: CHANGING PERSPECTIVES AND EVOLVING ROLE

In May 2025, the OEB appointed Frederic Waks, President and CEO of Trinity Development Group and former President and COO of RioCan, to its Board of Directors.[54] This appointment introduced a development-sector perspective to a body traditionally composed of individuals with backgrounds in utilities, law, and public policy. The addition of Waks aligns with the government’s emphasis on the need for interdependence between housing and infrastructure development.

The continued evolution of the Board of Director’s composition, particularly the inclusion of sector-specific expertise, intersects with the OEB’s dual mandate of regulatory independence and policy responsiveness. While the Board of Directors does not participate in adjudicative decisions, it is responsible for appointing adjudicators and shaping strategic direction. This ongoing evolution invites further reflection on how governance structures can balance the benefits of sectoral insight with the imperative to preserve adjudicative independence.

CONCLUSION

Ontario’s housing policy agenda is reshaping the regulatory landscape in ways that echo earlier moments of legislative intervention, such as the Green Energy and Green Economy Act. Just as the GEA expanded the Ontario Energy Board’s (“OEB”) mandate to incorporate environmental and conservation objectives, the current focus on housing affordability and growth is prompting a recalibration of the Board’s regulatory tools and priorities.

The Enbridge Phase 1 decision and its legislative reversal through the Keeping Energy Costs Down Act, 2024, illustrate how government direction can redefine the boundaries of the OEB’s discretion. Subsequent amendments to the Distribution System Code, the introduction of the Capacity Allocation Model, and the extension of connection and revenue horizons reflect a regulatory framework increasingly oriented toward enabling infrastructure to support housing development.

These developments suggest a broader evolution in the OEB’s role, from a regulator primarily focused on economic oversight and consumer protection to one that is also expected to facilitate provincial policy objectives related to land use, growth, and affordability. The inclusion of development-sector expertise on the Board signals this changing orientation, introducing perspectives more closely aligned with infrastructure and housing policy. The implications of this shift for the OEB’s regulatory approach are likely to be shaped by how government, regulators, industry, and communities continue to interact and respond to emerging policy objectives. 

 

« Previous Next »

Leave a Reply