Artificial intelligence (AI) is rapidly reshaping demand for digital infrastructure, and municipalities are increasingly finding themselves at the centre of the conversation. As municipal professionals navigate this space, AMCTO continues to remain connected.
On August 13, the Ontario government released the framework for its proposed Data Centre Playbook (PDF), a provincial tool intended to guide how data centre projects are evaluated and approved for connection to Ontario's electricity grid. The framework is part of Ontario's broader effort to attract investment, strengthen digital sovereignty, and support AI-driven economic growth. It also arrives at a time when municipalities across the province are already grappling with data centre development.
For municipalities, this is more than a technology story. It is a municipal governance issue that touches land use planning, infrastructure capacity, energy policy, environmental sustainability, economic development, and community engagement. Most importantly, it raises new questions about how provincial priorities and municipal decision-making will intersect as demand for large-scale data infrastructure continues to grow.
The provincial consultation is open through the Environmental Registry of Ontario (ERO No. 026-0853). The comment period closes on September 12, 2026. Municipalities that are already reviewing data centre proposals, considering planning updates, or implementing moratoriums may wish to provide input before the framework is finalized.
Municipalities Are Already Navigating the Issue
Data centres are not new to Ontario, but the scale and intensity of facilities being proposed to support AI is changing the conversation.
While municipalities recognize the potential benefits of data centre investment, including significant capital spending, assessment growth, construction activity, and economic development opportunities, councils and residents have also raised concerns about electricity demand, water consumption, noise, and the relatively limited number of permanent jobs associated with these facilities.
In many cases, municipal planning frameworks were not designed with AI-scale data centres in mind. As a result, some local governments have begun reviewing whether their existing official plans, zoning provisions, and development approval processes are equipped to manage this emerging form of development. Recent municipal approaches include:
- Hamilton: Debated a temporary pause on data centre development, but council ultimately voted against it.
- Mississauga: Approved a one-year moratorium on AI data centres while staff develops a regulatory framework.
- Toronto: Directed staff to study land-use compatibility, infrastructure requirements, and environmental impacts associated with AI-oriented facilities.
Centre Wellington: A councillor proposed a township-wide interim control bylaw following a proposal to develop an AI data centre on a former manufacturing site in Fergus. Staff was directed to report back on where such facilities could be appropriately permitted.
Essex: The mayor introduced a motion directing staff to prepare an interim control bylaw while the county undertakes further study of data centre development. The motion is expected to go before council for a vote in early September.
These different approaches reflect an important reality: municipalities are not necessarily opposed to data centre development. Rather, many are seeking to determine what responsible development looks like before making long-term planning decisions.
A Provincial Framework for a Rapidly Changing Sector
The proposed Data Centre Playbook is organized around three pillars: economic development, data security and digital sovereignty, and community benefits. As an Association, we are building our capacity on AI-related topics as we look to the release of a second edition of our Issue Profile in the new year.
Several elements of the framework are particularly relevant for municipal governments:
- Provincial approval authority: Under the Protect Ontario by Securing Affordable Energy for Generations Act, the Minister of Energy and Mines has final decision-making authority over whether large-load facilities, including many data centres, can connect to Ontario's electricity system. Municipalities retain responsibility for land use planning and development approvals, but the province plays a more direct role in determining whether large projects can access the electricity grid.
- Cost recovery: The province proposes a new electricity rate class for facilities consuming more than 1 MW of power, intended to ensure data centres, rather than other ratepayers, cover the cost of their impact on the electricity system.
- Community benefits: The Playbook states that projects should deliver "significant and meaningful" benefits to host communities. However, it does not yet specify how those benefits will be defined, negotiated, or enforced, nor what role municipalities will have in shaping them.
- Environmental performance: The framework signals a preference for closed-loop cooling systems that minimize water consumption, directly addressing one of the concerns most frequently raised by municipalities and residents.
The Role of Interim Control Bylaws
Several municipal responses to data centre proposals have relied on the same planning tool: the interim control bylaw. Under the Planning Act, councils can temporarily prohibit a specified land use while a planning study is being completed. An interim control bylaw can generally remain in effect for up to one year and may be extended for a maximum total period of two years.
A moratorium is not necessarily a statement against development. Rather, it can provide municipalities with time to assess an emerging land use, evaluate potential impacts, and develop an appropriate policy framework before making longer-term decisions. Whether that approach is necessary is a judgment each municipality is making differently, as recent debates in Hamilton and Mississauga demonstrate.
What Happens Next?
The core tension is straightforward: the Province is taking a larger role in determining which projects connect to Ontario's electricity system, while municipalities remain responsible for land use planning, servicing, infrastructure, and community impacts.
How those responsibilities interact will be one of the key questions as the Data Centre Playbook is refined. Municipalities will be watching closely to see how community benefits, infrastructure costs, and provincial approval decisions are ultimately structured. For municipal administrators who govern day-to-day operations, this could have implications for land use planning, infrastructure investment, economic development, and long-term financial planning.
We will continue to monitor the Data Centre Playbook and provide updates as the Province moves toward a final version and broader AI Industrial Strategy. If you have feedback or comments on these proposals, please reach out to our advocacy team.