This Morning’s Electricity Price Spike Probably Wasn’t About Tariffs

Just as Trump’s tariffs on Canada and Mexico went into effect in the wee hours of Tuesday morning, electricity prices in the Northeast appeared to spike. As I wrote back when the specter of tariffs first loomed in January, New England sources a substantial amount of electricity from Canada, meaning that the new duties could raise energy bills in the Northeast. But it’s far from clear that’s what happened here.

If you look at real-time hourly prices for electricity for New England over the past few weeks, you’ll see they regularly fluctuate between roughly $50 and $125. Here’s what electricity prices looked like in the preceding week — there was also a price spike between midnight and 1:00 a.m. on March 1.

At this point, the idea that the tariffs will apply to electricity imported from Canada is little more than a rumor. The two independent system operators in the northeast, ISO-New England and NYISO, both appear to still be in the dark on the question. When I reached out to NYISO this morning, the organization directed me to a statement it issued last week that says:

“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 NYISO believes that there are strong legal and policy arguments that the answer to both of these questions is ‘no.’”

When I followed up asking whether this meant that the Trump administration had not provided NYISO with any clarity on these questions, the organization declined to comment, adding, “We will continue to keep stakeholders and policymakers apprised through the open governance process as this process continues.”

Similarly, ISO New England would not confirm whether or not it had received any guidance from the Trump administration. “Based on legal precedent, we do not believe the tariffs placed on Canadian imports apply to electricity, but we are seeking additional guidance,” a spokesperson told me, adding that the power system was still “operating reliably,” and that imports are at similar levels as previous days.

Both organizations submitted proposals to the Federal Energy Regulatory Commission last week for how they would collect duties on electricity imported from Canada and recover the costs from customers, were they directed to do so by the federal government. In its filing, ISO-NE estimated that a 10% to 25% tariff could amount to $66 million to $165 million in additional costs to customers annually. (Another open question is whether the hypothetical tariff on electricity would be levied at 10% or 25%.)

As I reported at the end of January, there is no precedent for tariffs to apply to electricity. According to past reports from the U.S. International Trade Commission, the federal agency that advises on international trade and tariffs, “imports of electrical energy are not considered to be subject to the tariff laws of the United States.”

Whether or not the tariffs apply to electricity, some parts of the U.S. are likely to see a price spike imminently. On Tuesday morning, the Wall Street Journal reported that the minister of Ontario declared that the province would apply a 25% export tax on electricity delivered to roughly 1.5 million customers in New York, Michigan, and Minnesota. If the Trump administration proceeds to increase tariffs next month, the province threatened to stop exporting electricity to the U.S. altogether.

The Northeast may also experience higher electricity prices as a result of new 10% duties on natural gas imported from Canada. The Northeast is also heavily reliant on gas for heating, though imports from Canada to the region have declined in recent years as production in Appalachia increased.

The American Natural Gas Association issued a statement this morning noting that 9% of U.S. natural gas supplies are imported from Canada, and that the president’s 10% tariff on Canadian natural gas could burden U.S. consumers with $1.1 billion per year. It said the effects would be felt most in border states, including Vermont, New Hampshire and Maine.