Ontario Implements 25% Electric Export Tax: Implications for Minnesota

News Summary

Ontario’s new 25% tax on electricity exports to the U.S. raises concerns for Minnesota residents, but local utilities assure that the impact will be minimal. Major Minnesota energy suppliers, such as Xcel Energy and Great River Energy, report little to no reliance on Ontario’s electricity, indicating that residents’ electric bills are unlikely to rise significantly. The overall effect of this tax appears contained, although future trade tensions could alter the landscape.

Ontario’s New 25% Electric Export Tax: What It Means for Minnesota Residents

Starting this week, Ontario is implementing a 25% tax on electricity exported to the U.S. This bold move by the Ontario government, seen as a response to the ongoing trade tussle initiated by President Trump, specifically affects states like Minnesota, Michigan, and New York. But how will this impact the everyday lives of Minnesota residents? Spoiler alert: not as much as one might think.

Who Will Feel the Impact?

This tax affects roughly 1.5 million American households, but Minnesota utilities and the regional grid operator are stepping up to reassure residents. They state that the state’s reliance on electricity from Ontario is exceedingly low. In fact, many major Minnesota energy suppliers note minimal or no imports from Ontario.

Xcel Energy, the largest electric utility in Minnesota, reports that it does not import electricity or natural gas directly from Ontario at all. This means that, for their customers, the new export tax won’t lead to noticeable bumps in electric bills. Similarly, Great River Energy, which powers rural cooperatives, also has no contracts for electricity from Ontario.

What About Other Utilities?

Otter Tail Power has joined the chorus of assurance, confirming that they too lack contracts with Ontario. This suggests that their customers won’t bear any brunt from the new tax. Minnesota Power, a Duluth-based utility, sources a minuscule fraction of its electricity from Ontario. In 2024, they projected purchases from Ontario to be around $310,000. In stark contrast, they will spend approximately $108 million on electricity from Manitoba Hydro.

Low Proportion of Canadian Power

In terms of overall energy supplies, less than 1% of the energy provided to the Midcontinent Independent System Operator (MISO) in 2024 came from Canada, with an even smaller slice from Ontario. So, while the tax might affect some consumers, the majority of Minnesota residents seem to be safe from its effects.

Future Considerations

Interestingly, MISO is currently assessing how the Ontario tax will impact the electrical grid and market dynamics. Officials suggest that if any changes do occur—like potential increases in electric bills—these might take some time to become evident and would be determined by state regulators.

However, there is some concern about a possible 10% U.S. tariff on Canadian energy, which could be more impactful for Minnesotans, although it’s still unclear if this would apply directly to electricity imports.

Keeping an Eye on Trade Tensions

Some policymakers are viewing the Ontario tax as a mere symptom of larger trade issues, emphasizing the potential for significant negative consequences for Minnesota if trade relations with Canada worsen. In this perspective, the new tax is a warning sign of precious financial resources that could slip away from the state.

Amid this uncertainty, Minnesota Power has a long-term contract with Manitoba Hydro for 11% of its electricity, which, supported by a $700 million power line built in 2020, highlights the region’s greater dependence on Manitoba rather than Ontario.

The Bottom Line

Governor Walz has cautioned residents about the possibility of similar tariffs being placed by Manitoba, which could have a ripple effect on Minnesota consumers. Meanwhile, Xcel Energy is seeking rate increases of 9.6% in 2025 and 3.6% in 2026, although their electric bills still align below both national and state averages.

As the story unfolds, Minnesota residents can take comfort in the fact that, for now, their electric bills are less likely to soar due to Ontario’s new export tax. However, the ongoing trade tensions certainly warrant close attention moving forward.

Deeper Dive: News & Info About This Topic

• Star Tribune: Why Ontario’s Electricity Tariff Likely Won’t Hurt Minnesotans
• CBS News: Ontario Electricity Tariff Surcharge on Energy Exports
• Bloomberg: Ontario Raises Electricity Price by 25% for Minnesota, Michigan, and New York
• Bring Me The News: Ontario Imposes 25% Hike on Electricity Exports to Minnesota
• Twin Cities: Ontario’s Threat on Electricity Would Have Little Effect on Minnesota Power
• Wikipedia: Electricity in Canada
• Google Search: Ontario Electricity Tariff Impact on Minnesota
• Google Scholar: Ontario Electricity Tax
• Encyclopedia Britannica: Electricity
• Google News: Ontario Electricity 25% Tax