A 25 per cent surcharge on all Ontario electricity exports to the United States is now in effect and Premier Doug Ford is warning that he will “not hesitate” to increase the charge or even shut off energy exports entirely should the trade war persist.
The surcharge is among a suite of countermeasures being taken by the Ontario government in response to U.S. President Donald Trump’s tariffs on Canadian and Mexican goods.
In a news release issued on Monday morning, the province confirmed that “new market rules” are now in effect, which will require any generator selling electricity to the U.S. to add a 25 per cent surcharge, valued at $10 per megawatt-hour, to the cost of power.
The measure, officials say, is likely to bring in $300,000 to $400,000 in revenue a day and add about CAD $100 a month to some utility bills being paid by Americans in three states.
Ontario currently supplies electricity to about 1.5 million homes and businesses in New York, Michigan and Minnesota.
“Until these tariffs are off the table, until the threat of tariffs is gone for good Ontario will not relent. We will not back down. Pausing some tariffs and making last-minute exemptions won’t cut it. We need to end the chaos once and for all,” Ford said during a news conference at Queen’s Park. “Until then Ontario will keep up the fight. We will apply maximum pressure to maximize our leverage.”
Ontario says it is implementing the new surcharge through an “urgent amendment” to the market rules that apply to the Independent Electricity System Operator (IESO), which is the arms-length Crown corporation responsible for the province’s electrical grid.
Government officials say the regulatory authority provided to the IESO does not limit the surcharge to 25 per cent and would allow for it to be increased by any amount with little notice.
“Let’s just see how this rolls out. He (Trump) changes his mind literally every single day so I wouldn’t want to give you an exact date,” Ford said when asked whether the province would look to hike the tax should the U.S. follow through on threats of new reciprocal tariffs on April 2. “But make no mistake about it. If he (Trump) continues to attack our province and our country, taking jobs and families’ paycheques, taking food off their tables, I will do whatever it takes to maximize the pain against President Trump.”
Tax could ‘reverberate’ across America: Lecce
Ontario sells surplus electricity to New York, Michigan and Minnesota when its grid is producing more than Ontarians require.
The IESO says that this happens most often at night and on weekends when the demand for electricity is lower.
Energy Minister Stephen Lecce told reporters on Monday that Ontario is a net exporter of electricity by a factor of approximately 30. He said that the province typically sends about 12,000 megawatt hours of electricity to the United States every year.
In some cases, he said that electricity is then resold to other U.S. states, meaning that the impact of the export tax could have wider implications for Americans beyond the three states Ontario has energy partnerships with.
“If a state like Michigan flows our power through (their grid) and say sells it to Ohio or another state that means the surcharge is going to be reverberated right across America,” Lecce said.
Ford says Alberta may have to consider tax on oil
Trump implemented a sweeping 25 per cent tariff on most Canadian goods last week but, days later, agreed to exempt goods that fall under an existing North American free trade pact until April 2.
The latest salvo in the trade war taken by Ford comes after British Columbia Premier David Eby told CTV’s Question Period host Vassy Kapelos over the weekend that his province was in the process of passing legislation that would allow it to “to take measures that could impose export charges or restrict energy exports to the United States” as well.
Speaking with reporters on Monday, Ford said that he has spoken with premiers in several Canadian provinces about taking similar actions as the trade war continues.
“There is a whole bunch of us that ship energy down to the U.S. and we have to maximize it,” he said, specifically mentioning New Brunswick, Manitoba, Quebec and British Columbia.
Ford then seemed to suggest a desire for Alberta to consider an export tax on the oil it sends to the U.S. as well, seizing on comments made by Premier Danielle Smith last week in which she referred to Alberta energy as a “secret weapon” or “trump card” in the trade conflict with the United States.
Smith, however, has so far not indicated a willingness to consider an export tax on oil sent to the U.S.
“Remember the 4.3 million barrels of oil that is coming from Alberta. I think as Premier Smith said in the last couple days she has the trump card. Well message to Premier Smith: one day you might have to use that trump card, and give approval for an export tax,” Ford said. “That would instantly change the game. If Americans, all of a sudden their gas prices went up by 90 cents or a dollar a gallon, they would lose their minds. So we need to at least put that in the window but I don’t direct any of the premiers. That will be strictly up to Premier Smith.”
Ford appears on CNN
As Ontario implements its threatened tax on electricity exports, Ford is continuing to make appearances on U.S. television networks to draw attention to the potential consequences of a trade war with Canada.
He appeared on CNN on Monday afternoon and suggested that Trump is risking sending economies on both sides of the border into an unnecessary recession.
“There is no reason for a recession. I call it the self made Donald Trump recession,” he said. “He ran on a mandate to lower prices, to make sure we didn’t have inflation and to create more jobs and it has backfired. So lets sit down at the table and starting working on a new USMCA (free trade) deal.”
Ontario has said that the revenue from the export tax on electricity will go directly to supporting “Ontario workers, families and businesses.”
