NYISO and ISO-NE Prepare for Potential Import Tariffs on Electric Energy

On February 28, 2025, the New York Independent System Operator, Inc. (NYISO) and ISO New England, Inc. (ISO-NE) submitted proposed revisions to their respective wholesale market tariffs to the Federal Energy Regulatory Commission (FERC). These revisions aim to address possible tariffs on imports of electric energy from Canada.^[1] The proposals were made on an emergency basis in response to Executive Order 14193, issued on February 1, 2025, which imposes a 25% duty on “articles that are products of Canada” and a 10% duty on “energy and energy resources” imported from Canada.^[2] 

A Few Background Points

• The definition of energy and energy resources does not explicitly include electric energy imported from Canada. Furthermore, the U.S. government has never treated electric energy imports as a type of “article” potentially subject to tariff requirements. Nonetheless, the grid operators believed they needed to address the risk in revised wholesale market tariffs.
• Currently, the United States and Canada regularly exchange electric energy to balance the grid and ensure system reliability in both countries. In their FERC filings, the ISOs state that it is still unclear whether imports of electric energy from Canada will be subject to tariffs or if the ISOs will be required to collect or remit duties. However, the ISOs are not requesting that FERC make a jurisdictional determination or otherwise address the merits of implementing the Executive Order. Rather, the ISOs request that FERC accept the proposals to address the possibility that the ISOs will be required to collect and remit duties on imports of electric energy from Canada.

Why It Matters

ISOs are not-for-profit entities. The ISOs’ wholesale market tariffs do not currently include a mechanism for allocating costs associated with the potential import tariffs. Additionally, the ISOs cannot charge or collect rates that are not expressly permitted in their wholesale market tariffs on file with FERC.

• Considering the total transfer capability of the New England/Canada transmission system interface and the volume of energy exchanges between New England and Canada, ISO-NE estimates that a 10-25% tariff could result in import duties ranging from $66 to $165 million annually.

Without revisions to their wholesale market tariffs to address the issue, the ISOs would face severe adverse financial consequences and possible bankruptcy if they were required to absorb the tariffs on electric energy imports from Canada.

Key Points of the Proposals

NYISO Proposal (Docket No. ER25-1462-000)

To address the potential applicability of the tariffs to electric energy imports from Canada, NYISO proposes two options:

• Proposal 1: NYISO’s preferred approach is to assign duty costs to the entity responsible for scheduling the electrical energy imports from Canada, which could be either a Canadian or U.S. entity.
• Proposal 2: Alternatively, NYISO would assign duty-related costs to Transmission Customers on a pro-rata withdrawal basis, i.e., to retail-serving utilities and other load-serving entities.

Under either proposal, NYISO would determine the amount of Canadian electric energy subject to the tariff based on “real-time scheduled imports” data from “duty eligible proxy generator buses.” NYISO would price energy imports from Canada at the Day-Ahead Locational Based Marginal Pricing, incorporating the tariff price into the Day-Ahead price at the buses connecting the U.S. and Canadian transmission systems.

ISO-NE Proposal (Docket No. ER25-1445-000)

ISO-NE proposes implementing temporary measures to permit it to collect costs for any import duty that a federal agency directs the ISO to pay for Canadian-origin electricity sold in the ISO-NE market. Absent alternative guidance from a federal agency, ISO-NE proposes to assess the cost of such import duties on Market Participants selling Canadian electricity into the ISO-NE market. The amount collected would equal the amount of the imposed duty that is attributable to the entities’ sales into the ISO-NE markets.

What’s Next?

Considering the urgent need for the ISOs to recover costs related to potential duties, both entities are seeking expedited action from FERC.

• NYISO requests a FERC order by April 9, 2025. 
  • If FERC determines the NYISO tariff is not just and reasonable absent the proposed revisions and acts under Section 206 of the Federal Power Act (FPA), NYISO requests an effective date of February 28, 2025. 
  • However, if FERC acts under Section 205 of the FPA, which pertains to prospective changes, NYISO requests an effective date of March 1, 2025. 
• ISO-NE requests a FERC order by March 31, 2025, establishing an effective date for the tariff revisions of March 1, 2025. Once ISO-NE issues the first invoice to collect import duties, it would have 120 days to work with stakeholders to file a replacement cost-allocation mechanism with FERC.

^[1] See New York Independent System Operator, Inc., Docket No. ER25-1462-000, Proposed Tariff Revisions Under Section 206 of the Federal Power Act Regarding the Recovery and Allocation of Costs that Might be Imposed under the President’s February 1 Executive Order “Imposing Duties to Address the Flow of Illicit Drugs Across Our Northern Border,” Alternative Request for Action under Exigent Circumstances Section 205 Filing Authority (filed Feb. 28, 2025), available at https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20250228-5426&optimized=false; see also ISO New England, Inc., Docket No. ER25-1445-000, Exigent Circumstances Filing of Revisions to Transmission, Markets and Services Tariff to Permit Recovery of Import Duties (filed Feb. 28, 2025), available at https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20250228-5081&optimized=false.