Experts view provinces’ measures to restrict electricity exports to U.S. could hamper border ties

Mounting threats from provincial governments to restrict electricity exports to the United States could lead to higher power bills and more brownouts across the continent, according to legal and regulatory experts.

 

This past week, Ontario Premier Doug Ford announced a 25-per-cent surcharge on his province’s electricity exports to the U.S., effective Monday. Manitoba’s government issued a directive to Manitoba Hydro requiring cabinet approval before the Crown utility signs new power purchase agreements or export contracts with American customers, or extends existing arrangements. Quebec, meanwhile, has said it’s considering halting certain kinds of electricity transfers to U.S. customers.

 

Such measures, and the escalating trade war generally, threaten to disrupt decades-old electricity-sharing relationships that have benefitted both countries.

 

“Electricity is a perfect example of what happens if we don’t trade together: We’re weaker and they’re weaker,” said Thomas Timmins, head of Gowling WLG’s energy law practice.

 

“Our power system is going to be less reliable. Our electricity is going to be more expensive. Blackouts and brownouts will be more frequent.”

 

According to the Canada Energy Regulator, this country as a whole is typically a net exporter; In 2023, net exports to the U.S. totalled 27.6 terawatt hours and were valued at just under $4.3-billion. The main exporting provinces are Quebec, Ontario, Manitoba and B.C.

“Power goes back and forth across the international border every second and goes in both directions, and it operates as though there were no border,” Mr. Timmins said.

 

Premiers believe those electrons will offer more of a jolt if they’re not flowing.

 

“The big picture is this: When we look at those threats coming from Donald Trump’s administration, and you got the lower tariff level on electricity, energy, critical minerals, that’s a tell,” Manitoba Premier Wab Kinew told reporters during a scrum Thursday.

 

“It reveals an area where we have strength – something that they really, really need.”

 

Mr. Timmins said electricity generated in Canada is consumed as far away as the southeastern U.S.; terminating those transfers could significantly increase electricity costs there. Thus, exports indeed offer “substantial leverage.”

 

There are essentially two ways of exporting electricity. The first is to sell it on the “spot” market over short periods of time, for example in markets operated by an independent system operator, or negotiated directly with a buyer. This power is considered “surplus” and typically fetches low prices.

 

The other method is to enter into long-term contracts to sell power at fixed price, for at least several months and often years. Sometimes called “firm” exports, these arrangements are often more lucrative but can involve taking on substantial legal obligations.

 

“I can almost guarantee you that the provinces won’t renege on their power delivery commitments,” Mr. Timmins said.

 

“They’re not in the habit of willy-nilly breaching of power delivery obligations.”

 

While there’s a net outflow, Canada also imports power from its southern neighbour. The U.S. Energy Information Administration reported that the United States sent 18.4 terawatt hours to Canada in 2023 –more than 10 times greater than its exports to its only other electricity customer, Mexico.

 

B.C. Energy Minister Adrian Dix said North America’s integrated system allows B.C. to import power during droughts, while its power trading arm Powerex reaps an annual average profit of $550-million.

 

If that trade were cut off – either by the U.S. or by B.C. as retaliatory action – the main downside would be pressure on hydro rates in B.C., he said. Rates would have to climb by 1 per cent for every $60-million in cost pressure. By that measure, Powerex’s annual profits offset rates by 9 per cent.

 

“It would not be good news for us,” Mr. Dix said in an interview Friday. “I think we could withstand that, but it would not be without consequences, not just now, but over the next years and decades.”

 

Manitoba Hydro has for years extolled the virtues of export revenues. They represented more than 22 per cent of its total electricity sales during the 2010s; rates would otherwise have been about one-fifth higher. The utility also intends to sell surplus electricity from its newest generation plant, the 695-megawatt Keeyask hydroelectric project completed in 2022, until domestic electricity consumption catches up.

 

But it’s not just about money: The two countries also co-operate to stave off blackouts.

 

North America’s electricity grid is divided into nine jurisdictions, each managed by its own reliability council. According to the North American Electric Reliability Corp (NERC), an international regulatory body charged with ensuring grid reliability, there are 31 transmission lines connecting the two countries. The NERC has repeatedly called for additional transfer capability between the various regions to make the grid more reliable.

 

The NERC declined an interview request on Friday to explore the implications of Canada’s export threats to the continental grid’s reliability. But it plans to publish results from a detailed engineering study later this year examining the benefits of enhancing the ability to transfer electricity within and into Canada, stating that the country’s systems “play a crucial role” in North America’s bulk power system.

 

“North America’s integrated grid is designed to operate across the U.S./Canada border,” spokesperson Rachel Sherrard wrote in a statement.

 

“Cross-border power transfer is valuable for reliability because the free flow of electricity provides operating flexibility between regions during periods of greatest need, particularly for managing seasonal peaks.”

 

Electricity Canada, which represents the nation’s power suppliers, also declined to comment on the implications of the provincial measures. But in a statement Friday, CEO Francis Bradley wrote: “Electricity Canada strongly supports an integrated North American electricity grid which has enhanced the reliability and resilience of both systems.”

Much of the provinces’ plans remains unclear. On Friday, spokespersons for the Ontario Premier’s Office and Energy Minister Stephen Lecce repeatedly declined to explain how the government intends to implement the extra charges on U.S. electricity exports; both said details would be revealed Monday.

 

Earlier, Mr. Lecce had told The Globe and Mail that adding a per-megawatt surcharge on power exports would require passing legislation. That isn’t possible until the Ontario Legislature returns after last month’s election and MPPs are sworn in.

 

But Mr. Ford said Tuesday he’d asked his officials to find a way to bring in the charge more quickly – just days before he said his charges would in fact take effect this week, without any new legislation in place. On Friday, he announced that he would swear in a new cabinet March 19 and that the legislature would not return until April 14.

 

Officials from Manitoba and B.C. said they’re considering following Ontario’s lead on surcharges but have not committed to doing so. Mr. Dix said that will require careful evaluation to ensure that it would damage the U.S. more than B.C.

 

“Everything’s on the table, but I would say that our circumstances are very different than their circumstances,” he said. “If you’re only imposing the pain on yourself, that’s not very effective.”

 

Said Mr. Kinew: “Given the stakes – hundreds of megawatts, thousands of megawatts, depending on the time of year, billions of dollars – we’ve got to be really judicious here.”

 

 

 

 

This article was first reported by The Globe and Mail