Canada Reviews Power Rules for Net Zero

Ottawa launches talks on modernising electricity regulation to support innovation while safeguarding affordability and reliability 

12 Feb 2026

Canada’s federal government has begun a review of how electricity markets are regulated, as policymakers assess whether existing rules are suited to a more digital and low-carbon grid.

The Innovation and Electricity Regulation Initiative, led by Natural Resources Canada, brings together provinces, utilities, regulators and market operators. The aim is to examine how regulatory frameworks may need to evolve as the country works towards a net-zero economy by 2050 and seeks to further decarbonise its power system.

While the process does not alter formal structures, it signals a willingness to reconsider how utilities are rewarded and how new technologies are assessed. Industry participants say the discussions could influence how clean energy projects are integrated and how investment decisions are shaped over time.

Most Canadian utilities operate under cost-of-service models, which allow companies to recover capital spending on infrastructure and earn a regulated return. As the grid becomes more decentralised, with battery storage, distributed solar panels, smart meters and advanced software, some stakeholders argue that such models may not fully reflect the value of digital and flexible resources.

Performance-based approaches are among the options under discussion. These would link financial incentives to outcomes such as system reliability, emissions reductions and the integration of renewable power. No formal proposals have been adopted.

Federal officials have said that any modernisation must balance innovation with affordability and reliability. Electricity regulation remains under provincial authority, meaning any reforms would depend on local regulators and governments.

Market operators, including the Independent Electricity System Operator in Ontario, are monitoring the talks. Clearer regulatory treatment of storage, demand response and digital grid assets is being considered as a way to improve system flexibility.

Technology suppliers and investors are also watching closely, as clearer policy signals could shape long-term capital flows into Canada’s clean energy sector. Consumer groups, however, have urged caution, warning that changes should not expose households to unexpected costs.

The review is expected to continue over the coming months, with outcomes likely to vary across provinces as Canada weighs how best to align regulation with its energy transition.