Ontario pledged to build 1.5 million new homes by 2031, but local utilities face a massive funding gap to connect them to the power grid.
Sabrina Maddeaux and Mike Moffatt unpack the “last mile” infrastructure bottleneck stalling developments across the province, how historical energy policy created today’s friction, and practical policy fixes, from tax-exempt utility bonds to reforming the 90/10 tax rule, to keep the housing market moving.
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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.
Sabrina Maddeaux: Ontario has pledged to build 1.5 million new homes by 2031, which is now, if you can believe it, only five years away. It’s an ambitious goal that will be very difficult to achieve. Even if we could build that many new homes, could we also provide them with electricity?
Mike Moffatt: That’s a really big, important question. Ontario has a pretty big electricity infrastructure problem. We need to generate more power, but we also need to get that power to people, and the distribution side of that equation is often overlooked. It’s a massive system, and it’s in a lot of trouble.
Over the next 20 years, local utilities are facing a funding gap of roughly $100 billion to $120 billion just to upgrade things like poles, wires, substations, and switches. That’s becoming a real obstacle to building housing. In some areas, aging equipment and a lack of capacity mean that utilities simply can’t get enough power to new neighbourhoods.
Sabrina Maddeaux: That’s crazy, and something we definitely need to dig into. In this episode, we’ll answer the question: is Ontario’s electricity grid robust enough to meet today’s demand for new homes?
Sabrina Maddeaux: Both the federal and provincial governments have talked about Canada being an energy superpower. While the feds are building new pipelines, Ontario is putting a lot of money into the power grid.
According to Ontario’s Fall 2025 Economic Statement, it’s making one of the largest electricity transmission expansions in modern history. This includes building two new electricity transmission lines from Bowmanville to the GTA and from Windsor to Lakeshore. The province is also upgrading two major lines between Orangeville and Barrie and between Manby and Riverside Junction in Toronto.
Mike Moffatt: While those big infrastructure projects are extremely necessary and welcome, it’s actually not the big power corridors that are the most pressing problem in terms of building the number of new homes Ontario needs. It’s the last section where developers need to hook up to that expansive grid, called the “last mile.”
It’s that last mile where developers of new neighbourhoods are running into trouble. There’s a whole different set of issues to deal with in getting enough power to infill projects and existing neighbourhoods, which we’ll discuss in a future episode. For now, we’re just focusing on getting power to new homes in new neighbourhoods.
Sabrina Maddeaux: There’s a great example of this that The Globe and Mail highlighted recently, where a development in Brooklin, Ontario - just north of Whitby on the other side of the 407 - seems to have stalled because of the lack of ability to connect to the grid. The Globe reported that the local utility provider couldn’t connect 10,000 new homes without expanding its infrastructure, which would mean building two new low-voltage feeder lines from a transmission station in Whitby.
In a 2024 report, the Town of Whitby acknowledged that the lack of electrical infrastructure has become the main barrier to fulfilling its pledge to build 18,000 homes by 2031.
Mike Moffatt: This shows why it’s so difficult to build new housing. It’s an interrelated set of problems. Infrastructure gaps are just one reason why Ontario municipalities have struggled to meet their provincial housing start targets, but it’s one of many.
As of the latest data, Whitby has built less than half the homes they need to reach their provincial targets, and Ajax has built less than one-fifth; they’re 80% behind. Whitby and Ajax also happen to be smack in the middle of this electricity load capacity desert.
We’ll share the Ontario Energy Board map that highlights this, which is really telling. It shows the lack of capacity in this part of the province. If you’re listening on audio, you might want to check out the YouTube version, but we’ll also link to it in the show notes.
To be clear, there are a lot of reasons beyond electricity why these communities haven’t hit their provincial housing start targets, but given the Brooklin example, this electricity situation certainly isn’t helping.
Sabrina Maddeaux: What struck me about this story is how similar it is to the development fee issue. It all boils down to who pays for growth. The Brooklin project allegedly stalled because the developers felt they were being asked to pay super-high connection costs from the local utility, which would then need to be recouped through the price of the new homes. Those homes would therefore be too expensive in today’s market, and presumably, the project would no longer pencil out. You could say that the costs of upgrading the electricity system for the entire community blocked new people from becoming part of that same community.
Mike Moffatt: Absolutely.
It’s not just about the number of homes, though obviously that’s important. We also have to consider the changing nature of how we use electricity.
There’s a big push to get homes off natural gas and onto electric systems, like heat pumps. There’s also the massive increase in EV charging that’s already happened and will continue to happen, so the energy load per household is going to skyrocket in the coming years. When we build new grid infrastructure, we shouldn’t just build it to current demand levels; we have to build it to future demand levels. The needed investments are even larger than they appear at first glance.
Otherwise, you run into the situation we often see in infill development, where the builder of a small multiplex might discover that they can either have EV charging stations or electric heat pumps, but they can’t have both simply because they can’t get access to enough electricity.
Sabrina Maddeaux: For historical context, I think it’s important for people to know that Ontario was built on cheap power, delivered as close to cost as possible. In many respects, fast, easy, and reliable access to plentiful electricity was the backbone of Ontario’s economy from the very start of electrification over 100 years ago.
We take it for granted today that you flip a switch and the lights go on, but creating the system to make that possible was no small job, and that’s a big part of Ontario’s history. This came up in a recent episode we did on the creation of big infrastructure projects and who pays for public debt, which we’ll link to in the show notes.
Mike Moffatt: At the turn of the 20th century, electricity in Ontario was generated by a mishmash of private operators. Around 1908, Sir Adam Beck, a mayor and MPP from London, Ontario (where all good things come from), helped create the Hydro-Electric Power Commission of Ontario. He had a simple goal: to provide the province with cheap, publicly owned electricity.
By 1920, the commission had bought up a number of key private competitors, giving it control over electricity generation in the Niagara region. This helped spur the expansion of manufacturing across the province, which was the backbone of economic growth for decades and made Southwestern Ontario a manufacturing powerhouse. You have to look at the philosophy behind that expansion: Sir Adam Beck’s vision wasn’t just about having lights in homes, though that was important; it was about treating electricity as a foundational utility, like a road or sewer system, built ahead of the need to unlock the province’s potential.
Sabrina Maddeaux: Right, it was an “if you build it, they will come” model. They knew that if you brought power to a region, industry, housing, and growth would naturally follow.
Mike Moffatt: Normally I’m the one who makes Gen X movie references, so congratulations on a Field of Dreams reference! I hope the audience caught that.
But you’re exactly right. Somewhere along the way, the model shifted. We moved from viewing electricity as a public utility, a system we invest in collectively to support the province’s future, to viewing it as a project cost that needs to be managed on a ledger. Now, when a developer wants to build, they’re being asked to front the capital for the entire last-mile connection. That creates massive friction, which we’ve seen in many communities. We’ve gone from building power to enabling growth to requiring growth to fund that power. That’s the mismatch that potentially stalled projects like the one in Brooklin.
Forecasting long-run demand for electricity is tricky because you’re having to forecast the growth of new technologies that consume electricity, as well as the growth or decline of entire sectors that use large amounts of electricity, like manufacturing. If you take a just-in-time approach and require users to pay for just the infrastructure they need at this moment, you risk under- or over-building the system. More likely, that manifests as under-building because you’re just building for today, not the future.
Sabrina Maddeaux: Right. This brings us back to the last-mile portion of this story. In Ontario, its typical local distribution companies (LDCs) are responsible for the electricity network in a particular area. Most are owned by either the province or municipalities; think Hydro One or Toronto Hydro. They’re the ones that deliver electricity to homes, businesses, and factories in their region. There are 57 electricity distributors in Ontario, but it’s a pretty concentrated industry, with almost 80% of distribution handled by just five providers. These are the companies that maintain the local poles, wires, transformers, and other equipment that take electricity from the transmission system and get it into your neighbourhood and into your house.
Mike Moffatt: That’s exactly where we’re running into issues with the potential lack of upkeep of the system and disputes about who’s going to pay for the infrastructure upgrades needed to build all the new housing our province desperately needs.
You get into questions of how much of the system should be paid for by current users versus future users: Do we invest today, or do we invest later on? It doesn’t really matter what the domain is; if you ask people whether they want to pay today or have someone else pay for it in the future, the popular answer is always to make someone else pay. That tends to bias the system toward putting off investments until the last possible moment.
Sabrina Maddeaux: To sum up: on top of all the things we regularly talk about on The Missing Middle, like zoning, development charges, and the political will that impedes building homes, we can now add the last mile of the electrical grid to the list of things we need to work on. How do we fix this?
Mike Moffatt: This is just one more addition to a long list, but here are some ideas.
First, one of the big problems is raising enough low-cost capital, which is always the most challenging part of any infrastructure investment. The business model here is relatively simple: the utility invests, finances it - usually with debt - and pays off that debt from the revenue generated by increased electricity usage. But you need to get $100 billion to $120 billion to do that, so where does it come from?
When it comes to debt financing, utilities usually issue and sell bonds, just like governments do. But you have to figure out how to make those bonds attractive enough so investors will buy them. You could offer a massive rate of interest, but that’s expensive and makes electricity more costly for consumers than we’d want, so that’s not a solution. We have to figure out how to do this without jacking up interest rates.
One thing Canada should consider is making the interest on those utility bonds tax-exempt. That would encourage everyone from middle-class families to pension funds to buy them. The United States does this, and it seems to work reasonably well. That’s on the debt side.
When it comes to raising equity, there’s a rule in Canada’s Income Tax Act that a municipal service corporation, like Hydro Ottawa, must have at least 90% of its shares owned by a municipality and earn at least 90% of its income within its municipal boundaries. That makes it really hard to attract equity capital. If they loosened the so-called 90/10 rule to something like 80/20 or 70/30, it could attract a lot of much-needed capital to make those infrastructure investments.
Sabrina Maddeaux: That makes a lot of sense to me and seems like a relatively easy fix without any obvious unintended consequences. Municipalities would still maintain majority control while making it more attractive to investors.
Thank you so much for watching and listening. Our producer is Meredith Martin and our editor is Sean Foreman.
Mike Moffatt: If you have any thoughts or questions about famous people from London, Ontario, and the high schools named after them, please send us an email at [email protected].
Sabrina Maddeaux: We’ll see you next time.
Additional Reading/Listening that Helped Inform the Episode:
Debt/Deficit episode referred in video:
Why a multibillion-dollar electricity infrastructure gap is threatening Ontario’s housing goals
Tracking housing supply progress
Ontario Launches Expert Panel to Strengthen Local Electricity Distribution
2025 Ontario Economic Outlook and Fiscal Review
An early history of hydroelectric power in Niagara Falls
To Build More Homes, Ontario Launching Building Faster Fund and Expanding Strong Mayor Powers
Funded by the Neptis Foundation
Brought to you by the Missing Middle Initiative
Good points. Definitely the case that all the elements of growth require financing. Water and sewage also face funding issues. I just note that tax exempt bonds are not attractive to tax exempt pension plans, nor to individuals buying bonds through tax deferred accounts such as TFSAs or RIFs. The interest rate must be competitive with taxable bonds to attract these investors.