The Province of Ontario has enacted a landmark regulation, O Reg 101/25, that establishes a comprehensive legal framework for large electricity users to enter into corporate power purchase agreements (“PPAs”) with offsite renewable energy generators.

This regulation is—potentially—a major development for Ontario’s electricity market, opening up new opportunities for both renewable energy developers and large energy users. It marks Ontario’s entry into the world of virtual power purchase agreements—a model that has driven substantial innovation and economic development in other jurisdictions—but, as is usual, a good deal depends on roll-out and implementation.

Key features at a glance:

  • Legal framework and purpose: O Reg 101/25 amends O Reg 429/04 under the Electricity Act, 1998,[i] and is designed to accelerate the growth of clean electricity generation in Ontario.

     

  • Mechanism: Eligible purchase customers[ii] can reduce their Global Adjustment (GA) charges[iii]—often the largest component of their electricity bill—by contracting for renewable energy generated offsite. Although the buyer continues to use electricity from their local grid, and the renewable energy is added to the seller’s local grid, the mechanism treats the energy as if it were supplied behind the meter for GA settlement purposes—just as if the buyer had generated electricity onsite (or reduced its onsite demand).

    This mechanism enables buyers to support renewable energy projects and receive credit for such output, without the need to physically host a generator onsite. In these win-win contracts, generators gain access to a new source of secure, long-term funding.

  • Eligible technologies: Wind, water, biomass, biogas, biofuel, solar energy and geothermal energy.

Opportunities for corporate buyers

Large energy users can now contract directly for renewable energy, even if the generation is offsite, and receive financial credit in the form of reduced GA charges based on the volume of eligible electricity purchased.

The regulation’s requirements mean that strategic contract structuring and ongoing compliance are critical to maximize GA reductions and other benefits.

Key opportunities:

  • Cost savings and budget certainty: By reducing exposure to volatile GA charges and locking in renewable energy prices, organizations can achieve significant operational savings and more predictable energy costs.
  • ESG and decarbonization: These agreements give large companies a practical way to buy renewable energy and reduce their carbon footprint, supporting ESG and net-zero goals.

Eligible buyers: Class A market participants[iv] (large consumers of energy) who meet specific documentation and timing requirements.[v]

Opportunities for developers & generators

Renewable project developers can now secure long-term, creditworthy offtake agreements with corporate buyers, unlocking a valuable new market for project financing and development. The regulatory certainty provided by O Reg 101/25 makes Ontario’s market even more attractive for investment.

Key opportunities:

  • Stable, long-term revenue: The regulation creates a pathway to secure long-term offtake agreements with creditworthy corporate buyers, supporting financing for new projects or asset acquisitions.
  • New and existing projects: Opportunities exist for both existing and new renewable projects, provided new projects secure municipal support and avoid prime agricultural land.
  • Market differentiation: Projects that qualify under this mechanism offer financial incentives to buyers while also demonstrating strong municipal and community support, and will be well-positioned to attract buyers.

Eligible generators/facilities: Energy must be generated from wind, water, biomass, biogas, biofuel, solar energy or geothermal sources,[vi] and facilities must satisfy criteria related to operational status and municipal support.[vii]  

The regulation explicitly mentions facilities that were in commercial operation before the binding date of an eligible purchase agreement.[viii] This indicates that existing generators can participate and benefit from O Reg 101/25, provided they meet the other criteria for "eligible generation facilities"[ix] and "eligible electricity."[x]

The electricity supplied must be injected directly into the IESO-controlled grid or a local distributor's system and cannot be covered under any existing IESO contract or capacity auction.

While the core regulation is established, we anticipate that the Independent Electricity System Operator (IESO) or the Ministry of Energy will issue accompanying guidance documents, interpretations or minor amendments in the future as the framework is implemented and stakeholders gain experience.  That said, after many years of discussion, the foundational legal text is there. We look forward to seeing the implementation.

How Gowling WLG can help

Whether you’re a large energy user seeking to reduce costs and meet sustainability targets, or a developer looking to finance your next renewable project, our team can help you structure, negotiate and manage your power purchase agreements to maximize value and opportunities.

  • Structuring and negotiating PPAs: We help buyers and sellers design agreements that address regulatory, financial and operational risks.
  • Regulatory and permitting strategy: We advise on project development, permitting, municipal approvals and land use planning.
  • Ongoing compliance: We guide buyers and generators on their ongoing obligations to notify the IESO of changes to purchase agreements.
  • ESG reporting and communications: We advise on ESG reporting, environmental claims and support clients in public communications about their renewable energy strategy.

[i] Electricity Act, 1998, SO 1998, c 15, Schedule A.

[ii] O Reg 101/25, s 10.10.

[iv] Ibid at s 6(1).

[v] Supra note 2 at s 10.10.

[vi] Ibid at s 10.12(3)2.

[vii] Ibid at s 10.11–10.12.

[viii] Ibid at s 10.10(3).

[ix] Ibid at s 10.12.

[x] Ibid at s 10.9.