Introduction

Disconnected institutional layers in electricity systems refers to a situation where the different institutions responsible for electricity generation, transmission, distribution, regulation, municipal services, environmental approval, finance and consumer protection operate without sufficient coordination.

An electricity system is institutionally complex. A national government may determine energy policy; an independent regulator may issue licences and approve tariffs; a national utility may generate or transmit electricity; municipalities may distribute it; environmental authorities may approve projects; and courts supervise the legality of decisions. Although each institution may perform its own function correctly, the overall electricity system can still fail when these institutional layers do not communicate, coordinate or clearly allocate responsibility.

The problem is particularly important in countries such as South Africa, where electricity governance involves Eskom, NERSA, national government, provincial authorities and municipalities. South African litigation demonstrates that disputes over electricity supply frequently arise precisely because responsibilities are distributed across several public institutions.

Legal and Regulatory Framework

Institutional fragmentation must first be distinguished from legitimate institutional separation.

Modern electricity law intentionally divides powers. Independent regulators are separated from utilities to prevent conflicts of interest. Municipalities may receive constitutionally protected responsibilities for local electricity distribution, while national institutions remain responsible for generation, transmission and national energy policy.

Therefore, having several institutional layers is not itself a defect.

The problem arises when there is a coordination gap between them.

A simplified electricity governance chain may be represented as:

National Government → Energy Regulator → Generator/Transmission Utility → Municipality/Distributor → Consumer

Additional institutions may operate alongside this chain:

Environmental Authorities → Financial Institutions → Competition Authorities → Courts → Data/Cybersecurity Regulators

If information, authority or accountability cannot move effectively between these layers, the electricity network becomes institutionally disconnected.

South Africa provides an important example. The Electricity Regulation Act establishes a national regulatory framework and gives NERSA substantial regulatory authority, while municipalities retain important constitutional and statutory responsibilities concerning electricity distribution and municipal services. The Constitutional Court has itself recognised the significance of these distinct institutional responsibilities.

Key Issues and Principles

1. Fragmentation of Institutional Responsibility

The first problem is that responsibility for electricity may be distributed among numerous organisations.

For example:

the government determines energy policy;

NERSA regulates electricity activities;

Eskom participates in generation, transmission and supply;

municipalities distribute electricity in many areas;

municipal authorities collect electricity revenue;

courts review administrative decisions.

When electricity supply fails, each institution may argue that another institution was responsible.

This produces an accountability gap.

Consumers experience electricity as one continuous service, but legally the service may depend upon several separate institutional relationships.

2. Vertical Institutional Disconnection

Vertical disconnection occurs between different levels of government.

For example:

National Government
↓
Provincial Government
↓
Municipality
↓
Local Distributor
↓
Consumer

A municipality may be responsible for supplying electricity to residents but depend upon electricity supplied by Eskom.

If the municipality fails to pay Eskom, Eskom faces a financial problem. However, interruption of bulk supply may affect thousands of residents who have no control over the municipality's debt.

This demonstrates why electricity governance cannot always be understood through ordinary bilateral contracts.

In Eskom Holdings SOC Ltd v Lekwa Ratepayers Association; Eskom Holdings SOC Ltd v Vaal River Development Association, the Supreme Court of Appeal emphasised that electricity is among the basic services municipalities are constitutionally and statutorily required to provide. It also stressed the relevance of constitutional and statutory mechanisms for intergovernmental intervention and dispute resolution.

3. Horizontal Institutional Disconnection

Disconnection can also occur horizontally between institutions operating at approximately the same governance level.

For example:

Energy Regulator ↔ Environmental Regulator ↔ Competition Authority ↔ Treasury

A renewable-energy project might receive an electricity-related approval but experience difficulty obtaining environmental or planning permission.

Similarly, an electricity-market reform may be economically desirable but conflict with municipal revenue structures.

Horizontal coordination is therefore necessary because decisions made by one institution can significantly affect another.

4. Separation Between Technical and Legal Institutions

Electricity networks are highly technical systems.

Engineers may focus on:

frequency;

voltage;

grid stability;

reserve margins;

transmission capacity; and

generation adequacy.

Regulators and courts, however, must consider:

legality;

fairness;

constitutional rights;

tariff regulation;

consumer protection; and

administrative accountability.

When technical decision-making becomes institutionally isolated from legal supervision, important decisions may be treated as purely engineering matters even though they have major legal consequences.

National Energy Regulator of South Africa v Borbet SA (Pty) Ltd illustrates the point. The Supreme Court of Appeal treated NERSA's tariff adjudication as administrative action subject to judicial review rather than something insulated from scrutiny merely because specialised policy and regulatory expertise was involved.

5. Information Silos

Institutional disconnection is also an information problem.

Different organisations may possess different datasets concerning:

electricity demand;

generation capacity;

municipal debt;

network failures;

renewable projects;

consumer complaints;

electricity theft;

infrastructure deterioration; and

investment requirements.

If these databases are not effectively integrated, decision-makers may work from incomplete information.

One institution may therefore make a rational decision from its own limited perspective that becomes harmful when viewed from the perspective of the electricity system as a whole.

6. Financial Disconnection

Electricity systems also contain interconnected financial layers.

Consider:

Consumer → Municipality → Eskom → Generation/Transmission Investment

If consumers pay municipalities but municipalities fail to transfer amounts owed to the bulk supplier, the financial chain becomes disconnected.

This creates a difficult legal problem because cutting electricity to enforce payment against the municipality may impose the practical consequences upon residents.

South African electricity litigation has repeatedly confronted this tension between municipal indebtedness, Eskom's financial interests and residents' dependence on electricity.

7. Intergovernmental Cooperation

Constitutional systems often require different public institutions to cooperate rather than immediately exercise coercive powers against each other.

This principle became particularly important in litigation involving Eskom and indebted municipalities.

The Supreme Court of Appeal held that the relationship between Eskom and municipalities is not merely contractual. Eskom is an organ of state supplying electricity to local government so that municipalities can perform public responsibilities. Consequently, intergovernmental-relations requirements can become relevant before drastic supply interruptions are undertaken.

This is an important legal response to disconnected institutional layers: institutions must coordinate before their disputes are transferred to electricity consumers.

Case Laws

1. Joseph v City of Johannesburg (2009)

This Constitutional Court case concerned tenants whose electricity was disconnected because their landlord had accumulated substantial arrears.

The tenants had no direct electricity-supply contract with City Power.

The Court nevertheless recognised the broader public-law relationship between residents, municipalities and electricity service providers. It held that the affected residents were entitled to procedural fairness before termination of their electricity supply.

Relevance: The case demonstrates that institutional electricity relationships cannot always be reduced to contractual boundaries. Public responsibilities may connect institutions and consumers even where contractual links are absent.

2. National Energy Regulator of South Africa v Borbet SA (Pty) Ltd (2017)

The dispute concerned NERSA's approval of an additional electricity tariff adjustment sought by Eskom.

The Supreme Court of Appeal examined the respective roles of Eskom as the regulated electricity entity and NERSA as the statutory regulator.

The Court confirmed that NERSA's tariff adjudication constituted administrative action and was subject to the Promotion of Administrative Justice Act and judicial scrutiny.

Relevance: Institutional independence does not mean institutional isolation. Regulatory decisions remain connected to administrative law and judicial oversight.

3. Eskom Holdings SOC Ltd v Resilient Properties (Pty) Ltd (2020)

This important electricity dispute concerned Eskom's proposed interruption of electricity supplied to municipalities that owed substantial amounts to Eskom.

The litigation highlighted the institutional chain:

Eskom → Municipality → Residents

The courts emphasised that the relationship between Eskom and municipalities could not be regarded simply as a commercial relationship.

Relevance: Where two organs of state occupy different layers of an electricity system, constitutional principles of cooperative government and intergovernmental dispute resolution become important before decisions are taken that seriously affect residents. The subsequent appellate litigation expressly discusses these principles.

4. Eskom Holdings SOC Ltd v Letsemeng Local Municipality (2022)

The Supreme Court of Appeal again considered the complicated relationship between Eskom, municipalities and electricity consumers.

The Court explained that Eskom supplies bulk electricity to municipalities, which then distribute electricity to consumers through municipal networks. It further stressed Eskom's constitutional position as an organ of state and the constitutional obligations of local government concerning basic municipal services.

Relevance: The case illustrates institutional interdependence. Decisions taken at the national-utility level can affect whether municipalities are capable of performing their own constitutional responsibilities.

5. Eskom Holdings SOC Ltd v Vaal River Development Association (2022/2023)

This Constitutional Court litigation provides one of the clearest illustrations of layered electricity governance.

The case involved relationships among:

Residents → Municipalities → Eskom → NERSA → Courts

The Constitutional Court's judgments examined the respective responsibilities created by the Constitution and the Electricity Regulation Act. The Court recognised NERSA's extensive regulatory role while also examining the constitutional position of municipalities and Eskom.

Importantly, different judicial approaches in the case also demonstrate the difficulty of determining exactly which institution owes which obligation.

Relevance: It shows why disconnected institutional layers create complex legal disputes about responsibility, remedies and accountability.

6. Occupiers of Erven 139 Berea v City of Johannesburg (2020)

The High Court dealt with electricity disconnection affecting residents who lacked a direct contractual relationship with the City.

Relying substantially on Joseph, the Court recognised the relevance of procedural fairness where electricity services affecting residents are disconnected.

Relevance: The decision demonstrates that contractual separation between landlords, municipalities, utilities and residents does not necessarily eliminate public-law responsibilities.

Institutional Disconnection and Systemic Failure

The deeper problem is that electricity failures often result from interactions among institutions rather than failure of only one institution.

For example:

Municipal financial weakness
↓
Non-payment to electricity supplier
↓
Utility financial pressure
↓
Reduced infrastructure investment
↓
Network deterioration
↓
Supply interruptions
↓
Consumer economic losses

No single institution necessarily controls the entire chain.

This makes traditional legal accountability difficult because law frequently asks:

“Who made the unlawful decision?”

Complex electricity systems may instead require another question:

“Which institutional relationships allowed the failure to develop?”

This is the difference between individual institutional failure and systemic governance failure.

Legal Solutions

The law can reduce institutional fragmentation through clearer allocation of statutory responsibilities, mandatory information-sharing, coordinated planning, independent regulation, transparent tariff processes, intergovernmental dispute-resolution mechanisms and judicial review.

Particularly important is the principle of cooperative governance. Public institutions forming part of the same electricity system should ordinarily attempt to resolve institutional conflicts without unnecessarily transferring the consequences of those conflicts to consumers.

Courts also provide an important connecting mechanism. Judicial review can examine whether regulators, utilities and municipalities have remained within their respective statutory powers and whether their decisions comply with administrative and constitutional standards.

Conclusion

Disconnected institutional layers in electricity systems describe a governance problem in which electricity institutions are formally connected through the physical network but insufficiently connected through law, information, finance and administrative coordination.

South African cases provide strong illustrations. Joseph v City of Johannesburg demonstrates that public-law obligations can extend beyond narrow contractual relationships. NERSA v Borbet confirms judicial supervision of specialised regulatory decision-making. Resilient Properties, Letsemeng and Eskom v Vaal River Development Association demonstrate the complicated constitutional relationships among Eskom, municipalities, regulators and electricity users.

The central principle is that electricity infrastructure may operate as one physical system while its institutions operate as separate legal systems. Effective electricity governance therefore requires more than generators, transmission networks and distribution infrastructure. It requires connected institutions, clearly allocated responsibilities, reliable information flows, cooperative governance and effective accountability mechanisms.