Northeastern US grid operators don’t know how to deal with U.S. President Donald Trump’s tariffs on power imported from Canada — or if the electricity is even subject to duties.
Since Tuesday, most goods imported into the U.S. from Canada incur a 25% levy, but the duty is 10% for energy imports.
“Based on legal precedent, we do not believe the tariffs placed on Canadian imports apply to electricity, but we are seeking additional guidance,” Mary Cate Colapietro, spokesperson for grid operator ISO New England Inc., said in a statement on Thursday.
ISO New England told the United States Federal Energy Regulatory Commission on Feb. 28 that it lacks direction on how to allocate, collect and pay the import duties, which could amount to between $66 million and $165 million per year.
“Failure to have a cost-recovery mechanism in place prior to the effective date of a Canadian import tariff would place the ISO at risk of noncompliance with a federal obligation and, in a worst case scenario, could force the ISO to seek bankruptcy protection,” the operator said.
Colapietro said ISO New England is prepared to argue that electricity imports should not be covered by the tariffs, and if they are, “that the ISO should not be charged with collecting the duties.”
A spokesperson for Midcontinent Independent System Operator said it had not received confirmation from federal agencies “regarding the duties’ applicability to electricity or who will be responsible for paying or collecting them,” noting that the situation was “fluid” and “uncertain.”
New York Independent System Operator said in a news release on Feb. 28 that it is “essential” to “have clarity on this issue,” but declined to elaborate.
Ontario and Quebec are the Canadian provinces that export the most electricity to the US. On Monday, Ontario will add a 25% surcharge on its power exports to Minnesota, Michigan and New York in response to Trump’s tariffs. “It really bothers me that we have to do this,” Doug Ford, leader of Ontario, said on CNN Thursday.
It’s unclear if Ford’s decision will affect the states’ power supplies. Prices on the US electricity spot markets, the exchanges where the provinces sell their power, are based on short-term supply and demand.
Quebec, which sends power to New England and New York, hasn’t yet retaliated. “It’s far from evident how that works,” Hydro-Quebec’s Chief Executive Officer, Michael Sabia, told reporters last month. “If you come in at a price that is 10% or 15% higher, the market is just going to stay at whatever the spot market price is.”
--With assistance from Josh Saul.
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