The government of Ontario is applying a 25 percent surcharge starting Monday on electricity exports to three U.S. states in response to U.S. tariffs on Canada.
This surcharge will affect electricity sales for 1.5 million homes and businesses across Michigan, Minnesota and New York, the Ontario government said. In total, it could cost up to $400,000 per day.
New market rules are going into place requiring Canadian electricity sellers to add a $10 per megawatt-hour surcharge, equivalent to a quarter of the electricity’s average value, to the cost of power for sales to the U.S., according to a statement from Ontario’s Office of the Premier.
The additional charges are a response to 25 percent tariffs on Canadian and Mexican imports to the U.S. announced last week by the Trump administration.
Stock markets dropped again Monday as investors worried about the growing trade war. The Dow Jones average was down more than 550 points, or 1.3 percent, just after noon EDT. By 2:30 p.m., the Dow had fallen further, to 921 points down or 2.1 percent. It closed down 890 points, or 2.08 percent.
President Trump has taken a few steps to soften the blow of his tariffs.
Following the initial announcement, Trump exempted carmakers from the tariffs and then delayed them for a month for goods covered under the U.S.-Mexico-Canada Agreement, the update to the North American Free Trade Agreement that Trump renegotiated during his first term.
“We will not stand by as our vital electricity exports are taken for granted,” said Stephen Lecce, head of Ontario’s Ministry of Energy and Electrification. “In a time where prices are going up for families in America, Canada and the United States should be working together to strengthen our trade and investment relationships.”
The U.S. is Canada’s only trading partner for electricity, and the Canadian and U.S. electrical grids are highly integrated. In 2023, net electricity exports from Canada to the U.S. were 27.6 terawatt hours and came mostly from the provinces of Manitoba, Ontario, British Columbia and Quebec, according to the Canadian Energy Regulator.
The regulatory order from Ontario’s executive council says the U.S. is ignoring the rule of law by imposing the tariffs on Canada. Similar claims have been made by China with regard to World Trade Organization rules following the doubling of U.S. tariffs on China.
The regulation also says, “tariffs pose an existential threat to hundreds of thousands of jobs and whole sectors of the Ontario economy.”
The 25-percent tariff could eventually make its way into the electricity bills of American electricity users, but will be levied more directly on state-level electricity operators at the intermediate stage.
Rep. Tom Emmer (R-Minn.) suggested the new fee could backfire on Canada.
“The more [Canadian officials] try to make it painful on Americans the more it’s going to strengthen Donald Trump. He told everyone when he campaigned that this is what he was going to do. He was going to work for Americans. With the Canadians are doing is a mistake in my mind. It’s only going to help Donald Trump in his argument that they don’t care about you, I’m the only one who does,” Emmer said.
North American energy experts told The Hill that the surcharge could be paid either by public or private entities depending on the specific contracts with the Ontario government.
“It would be paid by the electricity system operator or by the contracting party,” Thomas Timmins, leader of the energy practice group at law firm Gowling WLG in Toronto, told The Hill. “It would be paid by whoever the counterparty is to Ontario, and there might be multiple counterparties … some of them might be governmental, some of them might be private.”
New York state’s grid manager, the New York Independent System Operator (NYISO), said in a Monday statement that it’s working to ensure “stable flows” of electricity from Ontario into New York.
The group said it “expects to have adequate reserves to meet reliability criteria and forecasted demand for New York.”
Trump has announced and then walked back tariffs on different occasions, leading to confusion about the extent and applicability of the orders. His March 4 tariff deadline for Canada and Mexico confused New York’s grid operator in particular.
“It is not yet clear whether imports of electrical energy from Canada are subject to the Canadian tariff order or, if they are, whether the NYISO will be required to play any role in collecting or remitting duties,” the group said at the end of February.
The Midcontinent Independent System Operator (MISO), which manages electricity distribution across 15 central states along with Manitoba, said the surcharge will be levied on the Canadian side of the border.
“MISO is still reviewing Ontario’s recent decision to apply an export tax on electricity, which will be collected on the Canadian side of the border,” Brandon Morris, communications adviser for MISO, said in an email to The Hill.
Energy industry experts told The Hill that they expect Ontario’s energy tariffs to have limited impacts on electricity prices.
“There have been limited impacts on real-time electricity prices,” said Rebekah Llamas, principal analyst with energy analytics firm Wood Mackenzie.
“We believe this is due to uncertainty in how this gets implemented and what the [Independent System Operators’] obligations are to remit [and] collect [as well as] milder weather and corresponding market conditions in general for this time of year.”
Ontario Premier Doug Ford, who has been a vociferous opponent of Trump’s North American tariffs and a champion of Canadian economic policies, defended his province’s electricity surcharge on Monday, arguing that Trump’s temporary pause on wide-ranging 25-percent tariffs did not undo the threat they posed to the Canadian economy.
“There‘s still 60 percent of goods that are crossing the borders that will be tariffed, and it‘s hurting both economies,” he told CNN on Monday. “It‘s one person that caused this problem, and that‘s President Trump as he is putting tariffs on us – even if he says he‘s putting it on hold.”
Markets have been tumbling on macroeconomic uncertainties over the past week, exacerbated by reversals on tariffs from Trump.
Consumer sentiment and inflation expectations popped in January, and the New York Fed’s survey of consumer expectations released Monday showed that U.S. households are more pessimistic about their financial prospects.
The share of U.S. households anticipating a worsened financial situation for the year ahead jumped to 27.4 percent in February, its highest level since November 2023 and a mark that Fed bankers described as a considerable deterioration.
Ford mentioned the macroeconomic uncertainty to defend his electricity tariffs.
“Uncertainty is what people don‘t like hearing … not to mention the markets are tumbling and investors from around the world are looking twice at America and in Canada to invest in,” he said Monday.
The Hill reached out to New York Gov. Kathy Hochul’s office and the North American Electric Reliability Corp. for comment.
