Ontario’s PULSE Report and Buy Ontario Considerations

Earlier today Ontario Energy and Mines Minister Stephen Lecce released the long-awaited Panel on Utility Leadership and Service Excellence (PULSE) report, setting out 10 recommendations to strengthen Ontario’s electricity distribution sector. The report addresses longer-term planning, governance, access to capital, regulatory modernization and workforce capacity.

The government announced a phased response to the PULSE recommendations, beginning with legislation planned for introduction. The proposed legislative package would:

• Modernize utility governance through independent, skills-based boards, municipal participation limits and greater disclosure.
• Create a framework to require long-term readiness planning, including 10-year asset, funding and workforce plans, executive certifications and dividend stress tests.
• Facilitate shared services and cross-service territory cost recovery among utilities.
• Reduce related regulatory barriers and support delivery capacity through workforce development and municipal energy planning.
• Strengthen consumer protections for unit sub-metering customers, including billing, service and winter disconnection safeguards.

Alongside PULSE implementation, legislation will advance a more coordinated approach to utility supply chain management to support local sourcing. These measures reflect the government’s interest in using the sector’s purchasing power to strengthen Ontario and Canadian manufacturing, improve supply resilience and capture economies of scale.

Together, this underscores the province’s view that Ontario’s electricity distribution sector is moving into a period of structural change. Rising demand, electrification, housing growth and industrial investment are placing new pressure on local distribution companies (LDCs), municipal shareholders, and the framework that regulates them. The release marks the beginning of an implementation period, with the report’s recommendations requiring a series of policy, regulatory and potentially legislative decisions in the weeks and months to come.

The government is making clear that Ontario cannot deliver its broader energy and economic growth plans unless distribution systems are ready to connect new load, finance major capital programs and build infrastructure at a faster pace. Stronger balance sheets and better planning will need to be matched by procurement arrangements and domestic manufacturing capacity capable of delivering the build-out.

PULSE Recommendations

The PULSE report contains 10 recommendations that seek to strengthen utility planning and governance, improve access to capital, modernize regulation, and build the workforce needed for a higher-growth electricity system. While the Panel offered these measures for the province’s consideration, their practical effect will depend on the government’s implementation decisions and any required regulatory or legislative actions.

1. Utility readiness and 10-year planning

Each utility should file a Certificate of Readiness with the Ontario Energy Board (OEB), jointly signed by its Board Chair and CEO. Through the certificate, they would attest that the utility has a 10-year asset plan, a funding strategy developed in consultation with municipal shareholders and a workforce strategy. The report proposes an initial January 1, 2027 filing date, refreshed every five years.

2. Dividend policy alignment

Utility boards should ensure that dividend policies are consistent with long-term financing strategies and regularly stress-tested against plausible demand and financing scenarios.

3. Municipal capital planning

Municipal shareholders should align their capital budgets with the utility funding strategies developed through the readiness process. The report proposes a July 1, 2027 deadline.

4. Skills-based governance

Boards should be skills-based and sized to the utility’s complexity, generally with seven to 11 directors. The report recommends that municipal elected officials and their delegates comprise no more than one-third of board membership, while preserving a balance among municipal, investor and independent representation. The Minister announced a modified approach that limits municipal representation to one non-voting member.

5. A growth-ready rate framework

The OEB’s Next Generation Rate Framework should better align incentives, capital recovery and performance outcomes, giving utilities a credible opportunity to earn the allowed return while delivering timely investment and service.

6. A fit-for-purpose MAADs framework

The OEB should adopt a more proportionate, risk-based approach to mergers, acquisitions, amalgamations and divestitures, including a streamlined pathway for prescribed low-risk transactions and greater recognition of scale and investment readiness.

7. Permanent Departure Tax reform

New external equity used to fund utility operations could receive an exemption for ownership of up to 50%. Above that threshold, the tax would apply only to the portion above 50%. Municipal sales of existing ownership would remain proportionately taxable.

8. Public capital to catalyze investment

The province should use the Building Ontario Fund, subject to its governance and investment processes, to crowd in institutional investment and support infrastructure, consolidation, expansion and financial resilience.

9. Workforce and skills

Ontario should expand electricity distribution training and retraining, create pathways for workers from adjacent sectors and support Indigenous-led training and participation.

10. A formal progress review

The province should review progress by December 31, 2029 and assess whether further measures are needed to unlock capital, support partnerships and deliver infrastructure at pace.

What the release means for implementation

With the report now public, attention is on how the province translates its recommendations into action. The package has the potential to span legislative, regulatory and policy tools, with different measures requiring work by the OEB, the Ministry of Finance and other partners to be fully implemented, beginning with the bill set for introduction.

The report establishes long-term capital planning and utility readiness as core priorities. Its proposed approach would create a more consistent line of sight from forecast demand and asset needs to financing, dividends and workforce capability. Municipal owners would be expected to recognize those funding requirements in their own capital planning.

The report recommends skills-based boards and limits on municipal elected official representation. The Minister announced a different approach, with municipal representation limited to one non-voting member. The precise requirements and implementation arrangements will be points to look for.

The report’s Departure Tax recommendation is consequential, but its public release itself does not change the tax framework. Implementation will require further action and the Fall Economic Statement and spring Ontario Budget remain potential vehicles to watch. Similarly, the proposals for Building Ontario Fund participation and external capital require attention to the applicable policy, governance and investment processes.

The report places the OEB’s Next Generation Rate Framework and MAADs framework at the centre of distribution sector modernization. Work already underway at the OEB provides the regulatory context for these recommendations so the release should not be read as an immediate replacement of existing rate-setting or transaction-review requirements. The scope, timing and practical effect of subsequent OEB decisions will be critical.

The report identifies expanded training and retraining, pathways from adjacent sectors and Indigenous-led participation as essential to delivery. The implementation focus now turns to how those recommendations translate into trades, engineering, planning and project-delivery capacity, including the detailed programs and partnerships needed to support utility investment.

Supply chain management, Buy Ontario and joint procurement

The Minister announced new tools to enable joint procurement and better align utility purchasing with the government’s Buy Ontario strategies, as part of a reform package to be advanced through legislation planned for introduction. He emphasized making it easier for utilities to work together where it makes sense and to purchase more Canadian-made goods, services and components.

For LDCs, the emerging agenda connects long-term capital plans to procurement practices, supplier capacity and opportunities for collaboration. For equipment manufacturers and service providers, it increases the importance of demonstrating actual Ontario and Canadian production, local investment, technical capability and dependable delivery. In our assessment, suppliers able to substantiate feasible capacity expansion and respond to aggregated utility demand could be well positioned, while utilities will need evidence of both domestic sourcing opportunities and the operational constraints that warrant flexibility.

Sussex perspective

The nexus between energy policy and economic growth continues to be reinforced as provincial actions affect housing, industrial development, electrification, and the province’s ability to attract investment. The parallel emphasis on Buy Ontario and supply chain management broadens that agenda where utility investment is also being viewed as a means of supporting domestic manufacturing and economic resilience.

Why this matters:

• For LDCs, the proposed reforms would make long-term asset, financing and workforce planning a more explicit board-level obligation and could increase scrutiny of dividend policies, governance practices and capital readiness.
• For municipalities, the package seeks to connect utility investment needs more directly to municipal financial planning and implement new rules for how elected officials participate in utility governance.
• For investors and strategic partners, the prospect of tax reform, clearer governance and a reformed MAADs framework could improve the economics and predictability of new partnerships.
• For customers and Ontario’s economy, expectations are strong on faster connections, adequate capacity, continued reliability, and prudent investment.