Ontario’s 25 Percent Surcharge on Electricity Exports Could Affect 1.5 Million U.S. Consumers

The Ontario government on March 10 announced a 25 percent tariff on electricity exports to the U.S. in response to the Trump administration’s tariffs on Canadian goods and services. As Ontario shares 12 transmission connections with New York, Michigan, and Minnesota, the electricity tariffs could impact around 1.5 million homes and incur daily costs of C$400,000 for ratepayers. The new electricity tariffs are additional to the Canadian government’s C$30 billion retaliatory tariffs on U.S. products introduced last week.

The new market rules would direct electricity generators that export electricity to the U.S. to attach a 25 per cent surcharge, or C$10 per megawatt-hour (MWh) to the current cost of electricity produced. The Ontario government stated that the daily revenue generated from the surcharge, valued between C$300,000 and C$400,000, will support workers and families in the province.

On March 4, Ontario Premier Doug Ford wrote to the governors of Michigan, Minnesota and New York to notify them that the Ontario government would proceed with a 25 percent retaliatory tariff on electricity. Further, Ontario could increase the surcharge at any time and shut off electricity exports completely if the tariff war escalates.

New York Governor Kathy Hochul and Senator Charles Schumer called on the Trump administration to reverse the 10 percent energy tariffs on Canadian energy resources, which took effect on March 4, stating that residents would not be able to afford rising heating and electricity costs. Last week, Massachusetts Governor Maura Healy also criticized the tariffs on petroleum and natural gas imports from Canada, claiming that a 25 percent tariff on petroleum and natural gas imports could cost $910 million a year for Massachusetts and more than $2.5 billion for the New England consumers.

In preparation for the tariffs, ISO New England filed a proposal with the Federal Energy Regulatory Commission describing a mechanism to collect customs duties on electricity imports from Canada. The grid operator estimates that import duties from a 10 to 25 percent tariff on Canadian electricity could total $66 million to $165 million per year.