U.S. grid operators and policymakers are rushing to prepare for the Trump Administration’s threatened tariffs on imported Canadian electricity and the Canadian reaction, an unprecedented state of affairs disrupting one of the most integrated international electric grids in the world. As Ben Storrow wrote for E&E News, “Electricity has not traditionally been subject to tariffs. Electrons don’t stop at the local customs office to be inspected.”
Nevertheless, this aspect of the on-again, off-again trade skirmish with our northern neighbor may send power prices soaring across the northern United States. Whether or not these tariffs become reality, the tension intensified further yesterday, March 10, with Ontario’s imposition of a retaliatory 25% tariff on the province’s electricity exports to U.S. markets. While the tariffs will create upward pressure on wholesale power prices, rewarding certain U.S. generators and transmission owners, a long-term U.S.-Canada electricity trade war will negatively impact consumers and make it more difficult for states to affordably pursue their decarbonization targets.
Currently, power flows freely across the U.S.-Canada border via a number of interchanges. U.S. and Canadian generators have long made use of access to each other’s markets, while U.S. and Canadian grid operators have enjoyed the security that comes from being able to draw on imports in the event of a reliability squeeze. In particular, the New England and New York control areas, managed by ISO New England Inc. (“ISO-NE”) and the New York Independent System Operator (“NYISO”), rely on power flows between their grids and those of their Canadian neighbors to ensure system reliability and keep electricity costs low. ISO-NE has a total transfer capacity of more than 3 gigawatts with the Québec and New Brunswick systems, two Canadian grid operators who have combined to serve roughly 11% of New England’s load annually since 2020. The NYISO is just as intertwined with the Canadian grid, utilizing 4.6 gigawatts of transfer capacity to import energy from Hydro-Québec and Ontario’s Independent Electricity System Operator (“IESO”).
On February 1, 2025, President Trump issued an Executive Order (“EO”) announcing sanctions affecting a swath of Canadian goods, including a tariff on imported energy products such as oil and gas (at 10%) and electricity (at either 10% or 25%; the EO was unclear as to which rate would apply). On February 28, 2025, with the tariff set to come into effect on March 4, ISO-NE and the NYISO rushed to file emergency (or “exigent circumstance”) tariff revisions with the Federal Energy Regulatory Commission (“FERC”). (See the ISO-NE filing here and the NYISO filing here.) Because ISO-NE and the NYISO are bound by FERC’s filed rate doctrine, absent modifications to their own procedures, ISO-NE and the NYISO could be unable to begin collecting import tariffs and could potentially face insolvency. Both grid operators sought approval for the proposed tariff changes to take immediate effect.
While addressing a joint session of Congress on March 6, 2025, President Trump signaled that tariffs on Canadian imports would be delayed until April 2. But the uncertainty associated with his administration’s threats is already having effects. Yesterday, the province of Ontario imposed its own retributive 25% tariff on electricity exports to U.S. markets. In a statement announcing the tariff, Ontario Premier Doug Ford warned that “[until] the threat of tariffs is gone for good, Ontario won’t back down.” Later in the day, Québec Premier François Legault announced that Québec Province may order the cessation of any sales of Québecois electricity in the U.S. spot markets, and that Québec may revisit its multibillion-dollar power contracts to sell power into Massachusetts and New York via transmission lines that are set to enter operation in the coming year.
The costs to consumers in New England and New York of electricity tariffs could be severe. In its February 28 filing, ISO-NE estimated that import duties could amount to between $66 million and $165 million annually, an estimate that does not appear to account for the costs of retaliatory Canadian actions like the Ontario export tariff. In the coming years, both ISO-NE and the NYISO were set to rely on power and energy imports from Canada to serve growing demand and meet reliability needs. Tariffs on Canadian imports make it more expensive to do so.
Rising prices in northern U.S. wholesale electricity markets would favor U.S. generators and transmission owners who currently serve those markets—as well as those developers of generation or transmission facilities who can credibly promise to serve those markets in the near future—but harm U.S. consumers. Displacing Canadian hydropower imports may also result in a more carbon-intensive generation mix serving the region.
When the dust settles from this ongoing spat, the ramifications for the NYISO, ISO-NE, and other U.S. electricity markets will become clearer. Follow along with us as we track these tariffs and their effects in the coming months.
