Item - 2026.EX30.1

The Chief Financial Officer and Treasurer recommends that:  

1. City Council authorize the General Manager, Transportation Services, in consultation with the Chief Financial Officer and Treasurer, to negotiate and execute, on behalf of the City, amendments to the 2006 Street and Expressway Lighting Service Agreement with Toronto Hydro Energy Services Inc. based on the key terms attached as Attachment 1 - Services Agreement Amendments to this report and on such other terms and conditions satisfactory to the General Manager, Transportation Services, and in a form satisfactory to the City Solicitor.

2. City Council authorize the General Manager, Transportation Services, in consultation with the Chief Financial Officer and Treasurer, to provide input, collaborate with Toronto Hydro Energy Services Inc., and to approve, as needed, any modifications to the annual Streetlighting Program Plan as necessary for delivery of maintenance, capital works, capital coordination or operational requirements. Any adjustments must remain within Council-approved funding, preserve the program's overall scope, and maintain the terms of the Street and Expressway Lighting Service Agreement.

3. City Council delegate standing authority to the General Manager, Transportation Services to negotiate and execute on behalf of the City any subsequent amendments to the 2006 Street and Expressway Lighting Service Agreement with Toronto Hydro Energy Services Inc., on terms and conditions satisfactory to the General Manager, Transportation Services, and in a form satisfactory to the City Solicitor, subject to the following conditions:

a. any amendment shall not increase the overall funding commitment approved by Council; and

b. any amendment shall not materially impact the potential liability of the City.

Toronto’s streetlighting infrastructure, which includes 173,100 luminaires, 56,900 poles and 2,477 km of overhead and underground cables, is a critical public safety and quality of life asset that supports mobility, goods movement, nighttime visibility, and economic activity across the City. The streetlighting infrastructure is owned by Toronto Hydro due to a sale that occurred in late 2005. The City of Toronto currently compensates Toronto Hydro for the operation and maintenance of the system via a 30-year service agreement (known as the “Street and Expressway Lighting Service Agreement”, or “Services Agreement”). This agreement governs the delivery of streetlighting services and is separate and distinct from the City’s other relationships with Toronto Hydro.

Much of the streetlighting infrastructure has reached or exceeded its useful life, creating service and asset management challenges that require a more structured, long‑term renewal approach. Toronto Hydro has identified widespread deterioration in key components, particularly underground cables and structural streetlighting elements, which require strategic planned renewal rather than continued reactive maintenance. To address these risks and align the network with modern lighting standards, in collaboration with Toronto Hydro, and consistent with approvals included in the 2026 Budget, the City is recommending an enhanced, multi-year investment framework to renew the streetlighting system and support citywide conversion to energy‑efficient LED lighting.

The 2026 Budget included funding for a total investment of $577 million over 10 years in the City’s Capital Plan to support a comprehensive streetlighting program, including full LED conversion, enhanced capital renewal and rehabilitation investments, and sustained service standards across the citywide network. This report provides the next step by setting out the details of that investment and seeks authority to amend the Services Agreement between the City and Toronto Hydro to enable implementation. Amendments to the Services Agreement (Attachment 1) are needed to establish a revised funding model with updated terms for accountability and assurance related to program delivery, payment, and other conditions that align with the enhanced investment intended to enable the expanded scope of work.

The streetlighting system includes both regulated and unregulated assets. Any additional City funding provided under the proposed amendments would be applied only to streetlighting assets attributable to the City of Toronto as the customer and used to deliver municipal services, regardless of regulatory classification. Importantly, these costs are not recovered through general electricity distribution rates, ensuring that there is no cross‑subsidization to other electricity ratepayers.

While the Services Agreement includes expressway lighting assets, streetlighting assets located on the Gardiner Expressway and Don Valley Parkway are in transition (per the New Toronto Deal provincial upload commitment) and, as such, are not included within the City’s enhanced funding framework. Should the Province elect to support enhanced investments for these assets once the transfer is complete, the Province can work with the City and Toronto Hydro to advance enhanced maintenance activities.

The recommended infrastructure investment is consistent with the City’s Capital Prioritization Framework, Corporate Asset Management Plan, and state of good repair (SOGR) objectives. Work has been and will continue to be coordinated between Transportation Services and Toronto Hydro and aligned with the City’s capital coordination and congestion management frameworks, to coordinate construction and support capital delivery.

The enhanced investment is expected to support the following outcomes:

- Improved public safety through more reliable lighting and fewer “lights‑out” conditions.

- Renewal of aging underground and structural infrastructure to reduce failures, system outages and emergency repairs.

- Full LED conversion to improve nighttime visibility and lighting consistency.

- Strong governance, accountability, and budgetary control under the amended Services Agreement.

- Long term operating savings through energy efficiency and reduced reliance on temporary fixes.

- Improved compliance with modern lighting standards, including IES RP‑8 illumination requirements.

This report is supported by the Streetlighting Infrastructure Investment Report (Attachment 2), prepared by Toronto Hydro in response to City Council’s request for a more detailed report examining the costs and benefits of a citywide LED streetlighting conversion initiative, with further direction to assess the incremental requirement for streetlight system infrastructure renewal (2022.EX34.9). Toronto Hydro’s supporting report provides detailed analysis of asset condition, safety risks, LED conversion benefits, infrastructure renewal needs, and options considered. The recommended approach in this report draws on that analysis and reflects a balanced response to critical system risks, while recognizing the City’s need to manage competing capital priorities within limited available funding.

The Services Agreement specifically governs streetlighting services, and the financial impacts described in this section are separate and distinct from the City’s other financial, corporate, or regulatory relationships with Toronto Hydro.

Under the existing Services Agreement for street lighting, the City paid approximately $24.8 million to Toronto Hydro in 2025, excluding electricity usage costs. Of the total annual amount, approximately $21.3 million represented the streetlighting service fee, comprised of $16.1 million in operating costs and $5.2 million for capped annual capital expenditures. A further $3.5 million was allocated to Special Services, including Vision Zero initiatives ($1.0 million), pedestrian scale lighting operations, and other one-time or safety focused lighting improvements. Capital expenditures are reconciled every five years through an adjustment process under the Services Agreement. Most recently, as part of the reconciliation process, Toronto Hydro incurred higher-than-expected expenditures during the 2021-2025 period to address operational needs, resulting in an $18.5 million notice to the City.

Under the enhanced investment model, the City is proposing to replace the existing service fee schedule, annual spending caps, retrospective true‑ups, and other adjustment mechanisms with a single, integrated capital funding envelope governed through a Streetlighting Program Plan. Consistent with the proposed amendments to the Services Agreement, Toronto Hydro will prepare a 10‑year Streetlighting Program Plan (2026–2035) which will be presented to the City, with annual updates in Q3 for each subsequent year. The plan will categorize program works and funding across defined program areas, incorporating activities previously funded through the existing service fee, and will outline associated schedules, cash flow, capital coordination confirmation, and prioritization rationale, forming the basis for annual capital funding approvals through the City’s capital budget process.

As considered by City Council in February 2026, the 2026-2035 Capital Budget and Plan for Transportation Services includes $577.0 million for the enhanced streetlighting program over the remaining term of the Agreement (to 2035). The approved funding envelope supports the continuation of existing operations and maintenance, accelerated LED conversion, targeted renewal of critical underground and above‑ground infrastructure and maintains a provision for approved special services. Table 1 reflects the currently planned annual funding allocations (net of HST recoveries) in the 10‑Year Capital Plan, setting out the projected scope, prioritization and timing for the program.

Table 1: Enhanced Streetlighting Investment (2026-2035)

*Includes HST (net of HST recoveries)

Subject to the Chief Financial Officer and Treasurer’s written consent and all required approvals, Toronto Hydro may carry forward unspent funding to subsequent years or accelerate future year funding where it has demonstrated capacity to deliver work earlier, provided such funding remains consistent with the Streetlighting Program Plan.

Under the current Services Agreement, the City has previously managed most streetlighting costs as annual operating expenditures. The enhanced program shifts these expenditures to capital funding, with the intent to enable more planned and coordinated, multi-year renewal at scale. As a result, the program represents approximately $283.0 million in incremental capital investment over a 10-year period, with annual impacts ranging from $12.0 million to $47.0 million, supported through debt financing.

Special Services within the enhanced program are expected to be focused primarily to Pedestrian Scale Lighting (PSL), as spot improvements and Vision Zero initiatives are expected to be addressed through other funding buckets of the enhanced investment. Approximately $4.2 million annually may be allocated, at the City’s discretion, to support PSL and other approved Special Services that fall outside core streetlighting programs. As part of ongoing program implementation, Transportation Services is also exploring options to improve the efficiency and sustainability of maintaining City‑owned PSL assets over the longer term.

Energy costs will continue to be paid separately based on actual usage. Following full LED conversion, the City is expected to achieve annual energy savings of approximately $6.6 million. These savings will be incorporated into future Operating Budgets.