The Ontario Energy Board has rejected the application for the sale of the distribution arm of Orillia Power to Hydro One.
In a statement, the City of Orillia says it will be reviewing the decision and exploring what options are available moving forward.
Negotiations between the City and Hydro One started in September 2015 and a deal was concluded nearly a year later.
Besides the sale of Orillia Power's distribution arm for $26 million, the project included a Technological Hub, of which Hydro One paid $3 million for 16.4 acres of land in the Horne Business Park.
The City had suggested the deal could pour $200 to $300 million into the local economy and create an untold number of jobs.