Doug Ford’s implementation of a 25% tariff on electricity exports to certain U.S. states contrasts with François Legault’s cautious stance, prioritizing strong business ties with partners like New York. Experts suggest Ontario’s tariff is largely symbolic and unlikely to impact markets significantly. Quebec, anticipating future export revenues, is wary of imposing tariffs that could harm its reputation. Recent challenges, including reduced hydroelectric exports and fluctuating market dynamics, complicate Quebec’s export strategies, especially amidst climate-related vulnerabilities.
While Doug Ford implements a 25% tariff on electricity exports to select U.S. states, François Legault remains cautious about using this strategy to provoke Donald Trump. Experts, including Pierre-Olivier Pineau, indicate that Quebec prioritizes maintaining strong ties with its business partners in New York.
Understanding Ontario’s Electricity Tariff
Pierre-Olivier Pineau, a specialist in energy policy from HEC Montreal, describes the 25% surcharge on Ontario’s electricity exports as primarily a communication tactic. He emphasizes that this measure is rooted in political symbolism rather than a serious economic threat.
According to Pineau, the likelihood of this tariff significantly affecting American or Canadian markets is minimal. “It’s not a very serious threat in terms of electricity supply,” he states, noting that with rising energy costs in the U.S., American buyers will likely continue to engage with Ontario.
Nonetheless, he acknowledges that amid an ongoing trade conflict with the U.S., this action serves as an “effective gesture” to apply pressure on the Trump administration, showcasing the irrationality of the president’s policies.
Quebec’s Position on Electricity Exports
François Legault, the Premier of Quebec, believes that electricity exports could serve as a vital negotiating tool with American counterparts, although he has yet to act on this stance. “Significant contracts are on the horizon with Massachusetts and New York, and I am not ruling out the possibility of increasing prices in these agreements,” he asserted during a recent visit to Terrebonne, ahead of next week’s by-election.
Professor Pineau notes that Quebec aims to preserve favorable relations with its American partners. He cautions that imposing a tariff could be seen as antagonistic, potentially damaging Hydro-Québec’s international reputation.
Quebec has established a 25-year export agreement with New York set to begin in 2026, and the Legault administration anticipates substantial revenue growth from these future exports. They project revenues will rise to CAD 2.6 billion next year (+12.9%) and to CAD 3.9 billion the year after (+25.4%). Breaking these contracts could incur significant costs for Quebec residents.
Moreover, Yves-François Blanchet, leader of the Bloc Québécois, is against the idea of imposing a surcharge on Quebec’s electricity exports to the U.S., arguing that it undermines Quebec’s reliability as a supplier.
Challenges in Electricity Exports
Quebec’s electricity exports depend on surplus production after local consumption. Historically, Quebec has enjoyed ample surpluses, but in 2023, low precipitation led to a decline in exports, dropping from 8 TWh to only 3 TWh for New York. Hydro-Québec’s profits fell by 30% in 2024, attributed to reduced electricity sales outside the province. Professor Pineau highlights this situation as a reminder of Hydro-Québec’s vulnerability to climate variations and the necessity for adaptable import-export strategies.
Spot Market Dynamics
Ontario’s 25% tariffs apply to electricity transactions on the “spot market,” a dynamic platform akin to a stock exchange where Quebec also trades electricity. As long-term contracts with New York and Massachusetts are not yet in effect, Quebec relies on this fluctuating market. Interestingly, Quebec sometimes purchases electricity from New York, as occurred recently when the state offered energy at rates lower than Quebec’s production costs. In 2023, Quebec bought 1 TWh from New Yorkers.
Quebec’s Approach to Tariffs
Recent insights suggest that the Quebec government is exploring ways to implement tariffs on its electricity exports, similar to Ontario’s approach. Ontario’s electricity exports to Michigan, Minnesota, and New York have commenced, potentially generating additional revenue of CAD 300,000 to CAD 400,000 daily for the province. Quebec’s hesitance is partly due to its reduced electricity sales in short-term markets, stemming from depleted reservoirs and lower surpluses. Unlike Ontario, the Legault government is constrained by firm contracts with the United States, complicating its approach.