Cross-Institutional Rulemaking in Electricity Markets

1. Introduction

Cross-institutional rulemaking in electricity markets means the process by which different public institutions, regulators, system operators and other legally authorised bodies cooperate to create, amend and implement rules governing electricity markets.

Modern electricity markets involve many institutions. In the UK, for example, relevant bodies may include:

Parliament;

Department for Energy Security and Net Zero (DESNZ);

Ofgem;

NESO;

the Competition and Markets Authority (CMA);

local authorities;

electricity network operators; and

devolved administrations.

At the European level, institutions such as the European Commission, ACER and national regulatory authorities also participate in electricity-market rulemaking.

The main legal question is therefore: how can multiple institutions make compatible rules while remaining within their lawful powers?

2. Meaning of Cross-Institutional Rulemaking

Traditional regulation may involve one regulator making rules for one sector.

Electricity markets are different because rules concerning one part of the market can affect another.

For example:

Ofgem rule

↓

affects

Network operator

↓

affects

Generator connection

↓

affects

Wholesale electricity market

↓

affects

Consumers

Therefore, rulemaking requires coordination between institutions.

3. Main Institutions in the UK

Ofgem

Ofgem is the principal economic regulator for Great Britain's electricity and gas markets.

It regulates:

network companies;

licences;

price controls;

market arrangements;

consumer protection; and

competition-related matters within its statutory functions.

NESO

The National Energy System Operator has responsibilities concerning electricity-system operation and strategic energy-system planning.

Its role has increased the importance of coordination between system planning and economic regulation.

DESNZ

The Department for Energy Security and Net Zero develops government energy policy and prepares legislation.

It therefore operates at the policy and legislative level, while Ofgem operates primarily at the regulatory level.

CMA

The Competition and Markets Authority has important competition-law responsibilities.

Its work can overlap with electricity regulation where market structure or conduct raises competition concerns.

4. Legal Hierarchy of Electricity Rules

Cross-institutional rulemaking operates through different levels.

Level 1 — Primary legislation

Parliament creates the statutory framework.

Important legislation includes the:

Electricity Act 1989;

Energy Act 2013;

Energy Act 2023; and

Planning and Infrastructure Act 2025.

Level 2 — Government policy

Government establishes broader energy-policy objectives.

Level 3 — Regulatory rules

Ofgem makes or approves rules within its statutory powers.

Level 4 — Industry codes

Electricity-market participants operate under legally significant industry codes.

These include arrangements governing:

balancing;

connections;

transmission;

distribution;

settlement; and

system operation.

This produces a chain:

Parliament → Government → Ofgem → Industry Codes → Market Participants

5. Industry Codes

Industry codes are particularly important examples of cross-institutional rulemaking.

The electricity market operates through detailed codes such as:

Balancing and Settlement Code (BSC);

Connection and Use of System Code (CUSC);

Grid Code;

Distribution Code; and

System Operator–Transmission Owner Code (STC).

These rules are highly technical.

They determine how market participants interact with the electricity system.

Ofgem has statutory oversight over important aspects of these arrangements.

6. Code Modification Process

Electricity rules need to change as technology and markets change.

A modification may be proposed by:

a network operator;

supplier;

generator;

consumer representative; or

other eligible participant.

The proposal is then assessed through the relevant code process.

Ofgem may ultimately approve, reject or direct modifications depending on the statutory framework.

This creates a form of co-regulation, where technical rules are developed by industry participants but remain subject to regulatory oversight.

7. Why Cross-Institutional Rulemaking Is Necessary

Electricity markets are undergoing major changes because of:

renewable generation;

battery storage;

electric vehicles;

demand response;

smart meters;

distributed generation;

interconnectors; and

digitalisation.

Rules designed for a traditional centralised electricity system may not work effectively for a decentralised system.

Therefore, multiple institutions must continually adapt the regulatory framework.

8. Relevant Case Law: British Gas Trading Ltd v GEMA

British Gas Trading Ltd v GEMA [2016] EWCA Civ 848

The case concerned Ofgem's regulatory decision-making and the legal limits of its powers.

Relevance

It illustrates an important principle of cross-institutional rulemaking:

A regulator must exercise its powers within the authority granted by Parliament.

Technical expertise does not allow a regulator to disregard statutory limits.

Therefore, institutional cooperation must always remain subject to the relevant statutory framework.

9. Relevant Case Law: R (British Gas Trading Ltd) v GEMA

The British Gas litigation concerning Ofgem's regulatory decisions also demonstrates the importance of procedural fairness and statutory purpose in energy regulation.

The courts generally recognise the specialist expertise of regulators, but regulatory decisions remain subject to judicial review.

This creates an important balance:

Regulatory expertise

Legal accountability

10. Case Law: R (Good Law Project) v Secretary of State for Energy Security and Net Zero

Climate and energy-policy litigation also demonstrates the relationship between government policy and statutory decision-making.

Where government establishes energy-policy objectives, regulatory institutions must still operate within their own statutory responsibilities.

This is important because government policy and independent economic regulation are not identical legal functions.

11. European Cross-Institutional Rulemaking

The EU electricity market provides an even clearer example.

Important institutions include:

European Commission;

ACER;

national regulatory authorities;

transmission system operators;

electricity market operators; and

Member State governments.

EU legislation establishes common rules while allowing national institutions to implement and supervise those rules.

ACER provides coordination where decisions have cross-border effects.

12. Case Law: Germany v Commission

Germany v Commission, Case C-848/19 P

The CJEU examined the EU framework concerning the allocation of cross-border electricity interconnection capacity.

The Court addressed the role of EU institutions in ensuring effective cross-border electricity-market integration.

Relevance

The case demonstrates that electricity-market governance cannot always be left entirely to individual national institutions when infrastructure and market effects cross national borders.

EU-level coordination can therefore be legally necessary to achieve consistent market integration.

13. Case Law: Nord Stream and Regulatory Authority

Cross-border energy cases more generally demonstrate the importance of clearly defining institutional competences.

Where infrastructure or market rules affect several jurisdictions, questions may arise about:

which institution has jurisdiction;

which legal framework applies;

whether an institution exceeded its powers; and

how competing regulatory objectives should be reconciled.

These questions are central to cross-institutional electricity governance.

14. Judicial Review

Courts play an important role in controlling cross-institutional rulemaking.

Judicial review may examine:

Legality

Did the institution have legal authority?

Procedural fairness

Was the correct process followed?

Relevant considerations

Did the institution consider matters required by law?

Reasonableness

Was the decision within the range legally available to the decision-maker?

Proportionality

Where applicable, was the regulatory measure appropriately balanced against protected rights and interests?

The court does not normally replace the regulator's technical judgment with its own.

15. Devolution and Electricity Rulemaking

The UK also has a constitutional dimension.

Scotland, Wales and Northern Ireland have different degrees of devolved authority.

Energy regulation is not divided identically across these territories.

Therefore, electricity infrastructure and market decisions may involve:

UK Parliament;

UK Government;

Scottish Government;

Welsh Government;

Northern Ireland Executive;

Ofgem; and

other regulators.

This makes institutional coordination particularly important.

16. Consultation and Stakeholder Participation

Modern electricity rulemaking usually includes consultation.

Stakeholders may include:

generators;

suppliers;

network operators;

consumers;

storage operators;

renewable-energy developers;

industrial users; and

consumer organisations.

Consultation serves two functions.

First, it provides technical information to regulators.

Second, it improves procedural legitimacy by allowing affected parties to comment on proposed rules.

However, consultation does not mean that every stakeholder demand must be accepted.

The final decision must remain within the decision-maker's statutory authority.

17. Benefits of Cross-Institutional Rulemaking

1. Technical Expertise

Different institutions contribute specialised knowledge.

2. Better Coordination

Rules made by different authorities can be aligned.

3. Market Stability

Consistent rules reduce uncertainty.

4. Innovation

New technologies can be incorporated more quickly.

5. Cross-Border Integration

Common rules facilitate electricity trading across borders.

6. Accountability

Multiple institutions can provide checks and balances.

18. Main Legal Challenges

Institutional Overlap

Two authorities may have overlapping responsibilities.

Accountability

It may become unclear who is ultimately responsible for a regulatory decision.

Conflicting Objectives

Government may prioritise energy security while regulators also consider competition, efficiency and consumer protection.

Technical Complexity

Electricity codes are highly specialised.

Judicial Review

Regulatory decisions may be challenged where institutions exceed their powers.

Regulatory Delay

Multiple approval stages can slow market reform.

19. Importance for Future Electricity Markets

Cross-institutional rulemaking will become increasingly important with:

artificial intelligence;

smart grids;

battery storage;

vehicle-to-grid systems;

offshore wind;

hydrogen;

demand-side flexibility;

distributed energy resources; and

cross-border interconnection.

For example, regulating vehicle-to-grid electricity may require coordination between:

Ofgem + transport authorities + network operators + data regulators + government

This demonstrates that future electricity regulation will increasingly involve multiple regulatory institutions rather than one single energy regulator.

20. Conclusion

Cross-institutional rulemaking in electricity markets is the legal process through which different institutions jointly shape, approve, supervise and revise the rules governing electricity markets.

Its main features include:

primary legislation;

government energy policy;

independent regulatory decisions;

industry codes;

stakeholder consultation;

system-operator coordination;

competition oversight;

cross-border cooperation; and

judicial review.

The key legal principle is that institutional cooperation does not remove statutory boundaries. Each institution must act within the powers granted to it by law.

Cases concerning Ofgem and cross-border electricity regulation demonstrate the importance of statutory authority, procedural legality, regulatory expertise and judicial oversight.

For PhD-level energy law, the central issue is how electricity markets can achieve coordinated and technically effective rulemaking while maintaining clear institutional competence, transparency, accountability, stakeholder participation and judicial control.