Balancing Power: The Impact of Legal Review on Harmonising the European Electricity Market

Abstract European electricity regulation has evolved to include a novel category of binding sectoral rules known as terms, conditions, and methodologies (TCMs). These are created within a regulatory framework outlined in delegated Commission regulations by private electricity firms and approved by technocratic agencies, most notably the EU Agency for the Cooperation of Energy Regulators (ACER). Despite their technical nature, TCMs have significant economic impact. This prompts frequent appeals of ACER’s TCM decisions, questioning ACER’s role and the overall institutional equilibrium of the TCM procedure. ACER’s TCM decisions are subject to dual-level legal review – internal by ACER’s Board of Appeal and external by European Courts. This paper uses two case studies to examine how dual-level legal review impacts the institutional balance of the TCM procedure. We find that the two levels of review engage poorly, so that contrary to expectations, legal review creates uncertainty rather than clarity, allowing for considerable pragmatism. These findings show the importance of considering legal review when studying sectoral governance. Policy implications are also significant, as the identified issues inhibit innovation and problem-solving, the raison d’etre of the TCMs.