CROSS-BORDER ELECTRICITY TRADE WITH CANADA AND MEXICO

Meaning and Regulatory Context

Cross-border electricity trade with Canada and Mexico refers to the import and export of electric energy through transmission facilities connecting the United States with its neighbouring electricity systems. These transactions support reliability, regional balancing, efficient generation dispatch, emergency assistance, and access to lower-cost or complementary generation resources.

In the United States, cross-border electricity trade is governed primarily by the Federal Power Act (FPA), Department of Energy permitting and export-authorization requirements, FERC transmission rules, environmental law, reliability standards, and bilateral operational arrangements. DOE identifies two central elements of the federal international electricity programme: authorisation of electricity exports and approval of international transmission facilities.

Export Authorisation Under the Federal Power Act

Section 202(e) of the Federal Power Act governs exports of electricity from the United States. DOE may authorise exports where they will not impair the sufficiency of domestic electricity supply or impede coordinated operation of the U.S. electricity network.

DOE therefore considers whether adequate generation exists to satisfy firm domestic obligations and whether exports would cause regional transmission systems to operate outside accepted reliability criteria. Environmental review obligations may also apply.

The regulatory principle is that international electricity trading is permitted, but domestic reliability and network security remain overriding considerations.

Cross-Border Transmission Facilities

A separate approval regime applies to transmission lines crossing the Canadian or Mexican border. International transmission facilities require a Presidential permit administered by DOE under delegated executive authority.

DOE evaluates whether a proposed interconnection serves the public interest, including its effects on U.S. electric-system reliability. For example, in May 2026 DOE issued a permit for two new 230-kV lines between North Dakota and Canada, expected to add up to 650 MW of transfer capability.

Open Access and Non-Discrimination

Cross-border infrastructure can create market-power problems if one utility controls access to an international interconnector. DOE therefore applies principles of comparable open access and non-discrimination, reflecting the approach developed under FERC Order No. 888.

DOE has stated that international transmission facilities suitable for third-party use should provide access consistently with federal open-access principles rather than favouring affiliated generators or traders.

This is particularly important because Canadian hydroelectric imports, U.S. electricity exports to Mexico, and short-term trading arrangements often depend upon access to limited interconnection capacity.

CASE LAW 1: Public Utilities Commission of Rhode Island v Attleboro Steam & Electric Co., 273 U.S. 83 (1927)

Facts

A Rhode Island electricity company supplied power to an electricity distributor in Massachusetts under a long-term contract. Rhode Island regulators attempted to modify the rate charged for the interstate electricity transaction.

Legal Issue

Whether an individual state could regulate the price of electricity transmitted across state boundaries as part of interstate commerce.

Judgment

The U.S. Supreme Court held that the interstate wholesale electricity transaction was national rather than purely local in character and could not be subjected to direct state rate regulation.

Legal Principle/Ratio

Electricity transmitted across jurisdictional boundaries as part of a continuous interstate transaction falls within interstate commerce and requires federal rather than inconsistent state regulation.

Significance

Although the case concerned trade between U.S. states rather than Canada or Mexico, it established the constitutional foundation for federal regulation of electricity transactions extending beyond individual state boundaries and helped lead to enactment of the Federal Power Act.

CASE LAW 2: New York v Federal Energy Regulatory Commission, 535 U.S. 1 (2002)

Facts

FERC adopted Order No. 888, requiring public utilities to provide non-discriminatory open-access transmission services. New York challenged aspects of FERC's jurisdiction over electricity transmission associated with unbundled retail transactions.

Legal Issue

Whether the Federal Power Act authorised FERC to regulate interstate electricity transmission and impose open-access requirements.

Judgment

The Supreme Court upheld FERC's jurisdiction. It held that section 201(b) of the FPA gives FERC authority over the transmission of electric energy in interstate commerce, even though federal jurisdiction over electricity sales is generally limited to wholesale sales.

Legal Principle/Ratio

Federal authority extends broadly to interstate electricity transmission, permitting rules designed to prevent discriminatory network access.

Significance

The decision supports the regulatory principles applied to international electricity interconnections, where non-discriminatory transmission access is essential for effective competition and cross-border electricity trading.

Canada and Mexico in Practice

Trade with Canada is particularly important because interconnected regional markets permit exchanges involving substantial hydroelectric and other generation resources. Trade with Mexico similarly allows interconnected areas to exchange electricity for commercial and reliability purposes. DOE continues to issue active export authorisations for electricity trade with both countries.

However, cross-border transactions must accommodate differences in market structures, transmission systems, reliability requirements, environmental regulation, and national energy policies.

Conclusion

Cross-border electricity trade with Canada and Mexico combines energy trade, transmission regulation, reliability law, federal jurisdiction, environmental review, and competition principles. Section 202(e) of the Federal Power Act protects domestic supply and system coordination, while Presidential permits govern physical international interconnections. Cases such as Attleboro and New York v FERC establish the broader federal foundation for interstate transmission governance. Effective North American electricity integration therefore depends upon reliable interconnections, federal oversight, transparent market rules, and non-discriminatory access to scarce transmission capacity.