Ontario Launches New Competitive Procurement for Electricity Transmission – Toronto Third Line Update

This bulletin was last updated April 9, 2026.

The Independent Electricity System Operator (IESO) has announced its latest design decisions for a formal competitive procurement for new electricity transmission build in Ontario, also known as its “Transmitter Selection Framework” (TSF). The TSF follows from a July 10, 2023 letter of direction from the (then) Ontario Ministry of Energy.

Most recently, the TSF is being used by the IESO to procure a transmitter to develop, construct and operate a 900 MW electricity transmission line from Clarington into downtown Toronto, to come into service no later than 2037. This “Toronto Third Line” will use existing infrastructure corridors, together with underwater segments and routes, to create Ontario’s first underwater electricity transmission line.

Successful proponents of an RFQ are included in a registry of qualified electricity transmitters eligible to bid on subsequent RFPs for new identified transmission projects. The registry is currently open for the Toronto Third Line. Eligible proposals for identified projects must meet the following minimum criteria:

• Benefit all electricity ratepayers
• Estimated cost of C$100M or greater
• Nominal voltage of 200 kV or greater
• Sufficient lead time (at least 6 years)

Notably, identified transmission projects that do not meet all of the above-listed criteria will automatically be designated to incumbent transmitters such as Hydro One.

Successful TSF proponents will be awarded partial contracts for a yet-to-be-determined number of years following commercial operation, after which time the existing utility rate regulation mechanism administered by the Ontario Energy Board (OEB) will apply.

The partial contract is intended to control costs pertaining to project design, development and construction, including the creation of a maximum initial rate base for OEB rate regulation based on a fixed lifetime operations and maintenance (O&M) plan. The transmitter will be required to submit prescribed amounts for review by way of a cost-of-service application to the OEB. The transmitter’s revenue requirement, including some or all post-COD revenue, would be fixed via IESO contract and incorporated into the Uniform Transmission Rates (UTRs). Following IESO contract expiration, typical OEB rate regulation would apply subjecting all cost components for review and incorporation into the UTRs.

For the Toronto Third Line, however, all capital costs will be governed by an IESO contract until one year following commercial operation, and all non-capital costs (operations, maintenance and sustaining capital) will thereafter be governed by the OEB through rate regulation. The RFP will specify an allowable adjustment for certain prescribed capital costs that cannot be reasonably predicted at the time of bid submission.

This blended revenue structure (contract + rate regulation) appears to aim to strike a balance between fostering competitive economic growth on the one hand and relative long-term stability on the other hand. Competition can help maintain downward pressure on price while rate regulation can attract requisite large scale capital investment.

It is expected that successful proposals will also be required to demonstrate Indigenous participation, as is the case for the Toronto Third Line. The Request for Proposals (RFP) for the Toronto Third Line is anticipated to be launched in Q1 2027, with bids to be submitted by Q3 2027.

The IESO and OEB are considering whether to recommend the elimination of the leave to construct process for the Toronto Third Line, and instead include defined pre-construction milestones in the contract similar to the approach in other IESO procurement contracts.

It will be interesting to see if the competitive procurement element (together with the ratepayer benefit requirement) of the TSF will bring Ontario one step closer toward an integrated regional approach to east-west transmission development, or if the rate-regulated element will otherwise continue to foster more north-south transmission development to the U.S.

Our team is closely monitoring developments related to the Toronto Third Line and will provide updates as more details become available.

For more information, please contact the authors or any other member of our Energy Regulatory or Power groups.