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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
As a rate regulated utility company, the Company recovers income taxes from its ratepayers based on estimated current income tax expense in respect of its regulated business. The amounts of deferred income taxes related to regulated operations which are considered to be more likely-than-not to be recoverable from, or refundable to, ratepayers in future periods are recognized as deferred income tax regulatory assets or deferred income tax regulatory liabilities, with an offset to deferred income tax recovery or deferred income tax expense, respectively. The Company’s consolidated income tax expense or income tax recovery for the period includes all current and deferred income tax expenses for the period net of the regulated accounting offset to deferred income tax expense arising from temporary differences to be recovered from, or refunded to, customers in future rates. Thus, the Company’s income tax expense or income tax recovery differs from the amount that would have been recorded using the statutory income tax rate. As the Company operates in Ontario, it is subject to the combined Canadian federal and Ontario statutory rates of 26.5%.
The reconciliation between the statutory and the effective tax rates is provided as follows:
20252024
Year ended December 31
(millions of dollars)(percentage)(millions of dollars)(percentage)
Income before income tax expense1,568 1,346 
Income tax expense at statutory rate of 26.5% (2024 - 26.5%)
416 26.5 %357 26.5 %
Increase (decrease) resulting from:
Net temporary differences recoverable in future rates charged to customers:
Capital cost allowance in excess of depreciation and amortization(106)(6.8)%(83)(6.2)%
Overheads capitalized for accounting but deducted for tax purposes(54)(3.4)%(51)(3.8)%
Interest capitalized for accounting but deducted for tax purposes(29)(1.8)%(23)(1.7)%
Pension and post-retirement benefit contributions in excess of pension expense(5)(0.3)%(10)(0.7)%
Non-refundable tax credit(5)(0.3)%(3)(0.2)%
Environmental expenditures(1)(0.1)%(3)(0.2)%
Other1 0.1 %(1)(0.1)%
Net temporary differences attributable to regulated business(199)(12.7)%(174)(12.9)%
Net permanent differences2 0.1 %(2)(0.1)%
Total income tax expense219 14.0 %181 13.4 %
The major components of income tax expense are as follows:
Year ended December 31 (millions of dollars)
20252024
Current income tax expense144 38 
Deferred income tax expense75 143 
Total income tax expense219 181 
Deferred Income Tax Assets and Liabilities
Deferred income tax assets and deferred income tax liabilities reflect the future income tax consequences attributable to temporary differences between the tax bases and the financial statement carrying amounts of the assets and liabilities including the carry forward amounts of tax losses and tax credits. Deferred income tax assets and deferred income tax liabilities attributable to the Company’s regulated business are recognized with a corresponding offset in deferred income tax regulatory assets and deferred income tax liabilities to reflect the anticipated recovery or repayment of these balances in the future electricity rates. As at December 31, 2025 and 2024, deferred income tax assets and deferred income tax liabilities consisted of the following:
As at December 31 (millions of dollars)
20252024
Deferred income tax assets
    Post-retirement and post-employment benefits expense in excess of cash payments616 585 
    Regulatory assets and liabilities491 449 
    Non-capital losses91 105 
    Non-depreciable capital property255 255 
    Tax credit carryforwards211 245 
    Investment in subsidiaries114 113 
    Capital losses27 19 
    Environmental expenditures15 16 
    Other3 11 
1,823 1,798 
Less: valuation allowance(399)(394)
Total deferred income tax assets1,424 1,404 
Deferred income tax liabilities
    Capital cost allowance in excess of depreciation and amortization2,874 2,494 
    Pension assets214 235 
Total deferred income tax liabilities3,088 2,729 
Net deferred income tax liabilities(1,664)(1,325)
The net deferred income tax liabilities are presented on the consolidated balance sheets as follows:
As at December 31 (millions of dollars)
20252024
Long-term:
    Deferred income tax assets135 127 
    Deferred income tax liabilities(1,799)(1,452)
Net deferred income tax liabilities(1,664)(1,325)
The valuation allowance for deferred income tax assets as at December 31, 2025 was $399 million (2024 - $394 million). The valuation allowance primarily relates to temporary differences for non-depreciable assets, investments in subsidiaries and capital losses carried forward.
As at December 31, 2025 and 2024, the Company had non-capital losses carried forward available to reduce future years’ taxable income, which expire as follows:
Year of expiry (millions of dollars)
20252024
20361 1 
20374 41 
203890 92 
203915 77 
20409 14 
204120 22 
204229 38 
204332 38 
204459 51 
204568 — 
Total losses327 374