Speaking at a campaign stop in a north Toronto on Friday, Hudak said the situation looks "awfully fishy."
"This is an agency that has received millions of dollars of grants from the McGuinty government," said Hudak. "Their books say they're running a deficit, but somehow they find the money to do expensive TV ads."
The Ontario Sustainable Energy Association launched two 30-second television ads Friday which, according to the company, profile "the strengths and benefits of an Ontario-made green energy economy."
The ads, which cost just under $200,000 to produce, were "100 per cent paid for by membership money" raised through fundraising, the agency said.
One of the ads ends with a call for viewers to "support those who support the Green Energy and Economy Act" -- legislation which was brought in by the Liberal government in 2009.
But the association's executive director maintains the ads were about a policy issue and weren't intended to tell Ontarians how to vote on Oct. 6.
"We're non partisan," Kristopher Stevens said in an interview, adding that OSEA had been advocating sustainable energy policies for a decade, long before green government programs came in.
"The awareness about the legislation was really what our objective was, to help people really understand that this is important," he said.
The Tories however, are looking to scrap main elements of the Green Energy Act by killing the feed-in tariff system and cancelling a $7-billion Samsung deal for wind and solar energy components. The feed-in tariff system offers stable prices under long-term contracts for renewable energy.
The NDP, meanwhile, has pledged to maintain the feed-in tariff program.
McGuinty, who was in Windsor visiting a plant which makes wind turbine parts, brushed off Tory jabs over the ads and said he was satisfied with OSEA's explanation.
"They're telling us that they didn't use that money for those purposes and I accept that," he said.
"We've got all kinds of organizations around the province that are committed to the democratic process and are getting involved in one way or another. I think that's a good thing. I think that's a healthy thing."
But a riled up Hudak repeatedly called on McGuinty to explain how much money his government had given the agency, just when he found out about the ads, and what connections the agency had with the Liberal party.
"I think Dalton McGuinty has a lot of questions to answer about what he knew about this and how much of public money that he gave them in grants is now going into ads to promote the Liberal party," Hudak said. "It's wrong."
Hudak hasn't promised to launch an official complaint but said his party is "looking into the details."
He said a complaint against the Liberals on this issue should come from ordinary voters.
Both OSEA ads carry a printed disclaimer which appears at the bottom of the screen towards the end saying the advertisement "refers to renewable energy public policy and does not endorse any particular party or candidate."
The association -- which expects to get a quarter of its funding from government grants this year -- has received money from the Ontario agriculture ministry and the energy ministry in the past.
It also posted a deficit of nearly $130,390 in its last fiscal update.
The two ads are set to run until Oct. 4 on CTV stations in Ottawa, Peterborough, Toronto, Hamilton, Barrie, Sault Ste. Marie, Sudbury and North Bay.
The agency has no plans to change them or register with Elections Ontario as a third party advertiser despite the Tory attacks as it maintains it isn't endorsing a particular party or candidate.
Third-party election advertisers spending $500 or more must register with the Chief Electoral Officer and disclose all ad spending and the identity of contributors who've donated more than $100.
Meanwhile, the Liberals pointed out Friday afternoon that another green energy group had aligned itself with the PCs but hadn't registered as a third party advertiser.
Wind Concerns Ontario, which calls itself an umbrella coalition of 57 grassroots citizen's groups, sends a "Vote Hudak" message on its website but it wasn't clear if the group had spent enough on any advertising to qualify as a third party advertiser.