In preparation for potential fees on electricity imports from Canada, ISO-NE requested authorization from FERC on Feb. 28 to collect import duties while simultaneously arguing that the RTO “is not the appropriate entity” to do so (ER25-1445).
The Trump administration’s monthlong pause of the tariffs on Canadian goods, which include a 10% fee on energy imports, expires March 4.
Vague language in the original executive order, coupled with limited communication from the administration, has created significant uncertainty regarding what is included in the energy carveout, how the tariffs will be applied and whether the tariffs apply to electricity. (See Uncertainty Remains Around Energy Tariffs amid Last-minute Deals.)
Along with the 10% energy tariff, President Donald Trump on Feb. 1 imposed tariffs of 25% on all other imports from Canada, as well as those from Mexico.
At a press conference March 3, Trump said the tariffs will proceed, with “no room left for Mexico or for Canada” to avoid them.
ISO-NE has argued that the tariffs “do not appear to apply to electricity and that, even if they do, ISO New England would not be responsible implementing them.”
The RTO noted that the definition referenced by the February order on Canadian imports does not explicitly include electricity. It defines energy or energy resources as “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water and critical minerals.”
ISO-NE also pointed to statements from the U.S. International Trade Commission indicating that electricity is exempt from U.S. tariff laws.
The RTO’s proposal is intended to protect it if the administration does in fact determine it is responsible for the tariffs, which would pose a “significant financial risk to the ISO” if it does not have the means to collect the fees, it said.
It noted that the “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.”
If it is unable to pay the duties, the federal government could direct the RTO to suspend imports, which could create “precipitous, adverse consequences” for grid reliability, ISO-NE wrote.
It estimated that a 10% tariff on electricity imports would cost the region about $66 million annually, while a 25% tariff would cost the region about $165 million annually. The RTO noted that Canadian imports have covered about 11% of the region’s load over the past five years.
Imports are poised to increase when the New England Clean Energy Connect (NECEC) transmission line comes online, likely by early 2026. The NECEC project includes a long-term contract for the supply of baseload power from Québec to Massachusetts. Hydro-Québec has said it is monitoring the potential effects of the tariffs on its long-term contracts.
To prevent potential fallout for the New England market, ISO-NE proposes a “temporary mechanism” enabling it to collect the tariffs. In the absence of direction from the administration regarding which entities ISO-NE should collect the duties from, the RTO would charge the fees “to the entities selling the assessed electricity into the ISO-administered market.”
If the federal government provides more specific information around the responsible entities, ISO-NE would alert its market participants and adopt the requirements, the RTO noted.
The proposal will only take effect if the Trump administration determines ISO-NE is responsible for the tariffs. If the temporary mechanism does take effect, the RTO said it would work with stakeholders to create a “cost-collection mechanism that is specific to the terms and conditions of the import tariff and resulting imposed import duties.” The RTO would be required to file the final mechanism within 120 days of the date the temporary mechanism takes effect.
ISO-NE said its proposal is intended to apply to any other future import duties imposed by the federal government on electricity. The Trump administration has said it may increase the tariffs if Canada retaliates with its own duties on U.S. goods.
Ontario Premier Doug Ford on March 3 said he is prepared to cut off electricity exports to the U.S. “with a smile on my face” if the tariffs go into effect.
“They rely on our energy. They need to feel the pain. They want to come at us hard; we’re going to come back twice as hard,” Ford said.
The RTO requested an expedited review of its order, asking FERC to rule on its filing by the end of March and accept a March 1 effective date for the proposal. It also asked for a shortened comment period ending March 10.
ISO-NE’s filing mirrored a proposal submitted by NYISO on the same date. NYISO also argued that the executive order does not appear to apply to electricity but asked FERC to authorize it to collect tariffs if required to do so by the administration. (See NYISO Preparing to Collect Duties on Canadian Electricity Imports.)
