ENERGY COORDINATION WITHOUT LAW

1. Introduction

Energy coordination without law refers to situations in which governments, regulators, electricity utilities, private generators, municipalities, regional organisations and consumers coordinate their conduct without relying exclusively on binding legislation or enforceable legal rules. Instead, coordination may occur through policies, technical standards, regulatory methodologies, industry practices, memoranda of understanding, informal governmental arrangements, market signals and voluntary cooperation.

Modern energy systems are technically interconnected. Electricity must ordinarily be generated and consumed in continuous balance, transmission networks cross administrative boundaries, and failures in one part of the system can affect other participants. Consequently, effective coordination frequently develops before, alongside, or beyond formal legal regulation.

This phenomenon is closely connected with soft law and informal governance. Soft-law instruments may lack the binding status of legislation while nevertheless strongly influencing the behaviour of energy institutions.

2. Forms of Non-Legal Energy Coordination

Energy coordination without direct legal compulsion can occur through several mechanisms.

First, technical coordination takes place between generators, transmission operators and distributors. Grid operators may develop operating protocols concerning frequency control, system balancing, maintenance schedules, emergency responses and electricity dispatch.

Second, policy coordination occurs through governmental energy plans, electricity pricing policies and planning frameworks. Although some policies do not themselves operate like statutes, regulators and utilities may organise their decisions around them.

Third, contractual and market coordination can connect independent power producers, utilities, traders and consumers. Power purchase agreements, network-access arrangements and market practices can therefore supplement public regulation.

Fourth, regional coordination is particularly significant. States may cooperate in electricity trading and interconnected power pools through institutional arrangements, technical rules and operating practices. The Southern African Power Pool (SAPP) illustrates how interconnected national electricity systems can coordinate cross-border electricity exchanges through regional institutional and technical mechanisms.

3. Why Coordination Without Law Develops

Formal legislation cannot anticipate every operational event occurring in an electricity system. Electricity networks require decisions on extremely short timescales, while legislation normally develops comparatively slowly.

Informal coordination therefore provides flexibility, technical expertise and rapid adaptation.

For example, where electricity demand suddenly exceeds available generation, system operators cannot ordinarily wait for Parliament or courts to determine how electricity should be dispatched. Technical institutions must coordinate immediately.

However, coordination without law also creates a constitutional problem: Who controls institutions exercising enormous practical power when their decisions are based on informal rules rather than legislation?

This is where administrative and constitutional law become important.

4. NERSA v Borbet SA (Pty) Ltd (2017)

A significant South African authority is National Energy Regulator of South Africa v Borbet SA (Pty) Ltd [2017] ZASCA 87.

The dispute concerned NERSA's approval of an additional electricity tariff increase sought by Eskom under the Multi-Year Price Determination Methodology (MYPDM). The methodology constituted an important regulatory mechanism through which tariff decisions were structured.

The Supreme Court of Appeal explained that South Africa's electricity regulatory system includes legislation, licences, pricing policies and regulatory methodologies. NERSA's decisions nevertheless constitute administrative action capable of judicial review.

The case is important for energy coordination because it demonstrates that policy and methodology may coordinate institutional behaviour without replacing the underlying legal framework. Informal or policy-based regulatory techniques do not give regulators freedom from legality, rationality and procedural fairness.

5. Borbet SA v NERSA (High Court, 2016)

The earlier High Court judgment in Borbet SA (Pty) Ltd v National Energy Regulator of South Africa [2016] ZAGPPHC 702 also demonstrates the interaction between formal and informal regulatory instruments.

The Court examined the Electricity Pricing Policy and the MYPD methodology used in determining Eskom's revenues and tariffs. The judgment recognised that the Electricity Pricing Policy provided broad guidelines to NERSA, while the MYPD methodology supplied a detailed regulatory mechanism.

Thus, energy governance can operate through a layered normative structure:

Legislation → Regulations → Licences → Policies → Methodologies → Technical Rules → Institutional Practices.

Not every layer has identical legal status, but collectively they coordinate the electricity system.

6. Constitutional Limits

Energy coordination cannot become completely detached from law. Section 1(c) of the South African Constitution establishes the supremacy of the Constitution and the rule of law.

Accordingly, a public authority cannot justify an otherwise unlawful decision merely by saying that it followed industry practice, governmental policy or an informal agreement.

Where coordination involves the exercise of public power, principles such as legality, rationality, accountability, procedural fairness and judicial review remain applicable.

The Borbet litigation reinforces this distinction. Regulatory expertise and policy discretion deserve appropriate judicial respect, but specialised energy regulation does not become immune from judicial scrutiny merely because technical methodologies or policy considerations are involved.

7. Advantages and Risks

Energy coordination without detailed legislation can produce significant benefits. It allows rapid decision-making, technical flexibility, regional cooperation, experimentation and adaptation to changing technology. This is particularly valuable in renewable-energy integration, electricity trading, grid balancing and emergency system management.

The risks are equally important. Informal governance can produce opacity, unequal bargaining power, weak public participation, regulatory capture and uncertain accountability. Powerful utilities or market participants may effectively create rules that significantly affect consumers without the democratic safeguards associated with legislation.

The law therefore performs a supervisory function even where it does not directly prescribe every operational decision.

8. Conclusion

Energy coordination without law does not mean energy governance in the complete absence of law. It describes coordination occurring through technical practices, policies, methodologies, contracts, voluntary arrangements and institutional cooperation rather than exclusively through detailed statutory commands.

Modern electricity systems could hardly function if every operational relationship had to be exhaustively determined by legislation. Informal and soft-law mechanisms therefore fill regulatory gaps and permit rapid technical coordination.

However, South African jurisprudence demonstrates that informality cannot displace constitutional legality. In NERSA v Borbet, the courts confronted precisely the relationship between statutory authority, regulatory methodology, policy and specialised decision-making. The broader principle is that energy governance may operate beyond detailed law, but public power cannot operate above law.

Thus, energy coordination without law is best understood as a hybrid governance system in which formal legislation establishes authority and accountability, while policies, technical standards, regulatory methodologies and cooperative practices provide the flexibility necessary to operate complex modern energy systems.