The present invention provides a power negotiation protocol that enables PDs and PSEs to negotiate the amount of inline power that a PD consumes and the corresponding PSE provides. This power negotiation allows the PDs provide fine-grained power consumption level to PSEs, and the PSEs are able to manage inline power efficiently using the negotiation protocol of the present invention. The PDs can ask the PSEs for more power when needed rather than having to constantly reserve the maximum amount of power they can consume at all times. Similarly, the PDs can release reservation of excess power when their respective power requirements decrease. The PSEs can limit the amount of power that can be consumed by the PD, thereby providing the ability for an administrator to control how much power a given PD can consume.