Western Power Distribution said there was no other suitable site in Lilleshall to put it.
Representatives from the utility supplier have now held talks with parish councillors over the decision which was made before a site visit attended by both parties could be held.
Chairman of Lilleshall Parish Council, Councillor Andrew Baker said: "We have spent a lot of money in the last two decades on cast iron signs and landscaping on the entrance to our village.
"Unfortunately Western Power Distribution in its wisdom wants to put a substation on the grass verge which is a tiny plot. Bearing in mind that this is going to be there for another 50 years, we think it is the wrong place for it.
"We are very disappointed and so are the neighbouring residents that the company has disregarded our requests.
"Under the guidelines such a substation should be at lease two yards from the pavement and should not be intrusive. It has not met either of those requirements.
"We want them to put it on the opposite side of the road where there is about an half acre of land to work with."
In a statement Western Power said: "As with all new substations, our engineers have carried out detailed electrical studies to identify a suitable location.
"Unfortunately, it was concluded that there is no other suitable location in the village for the siting of the substation.
"However, we have taken on board villagers’ comments about the appearance of the substation and are now looking at alternative designs to find a solution that is acceptable to everyone.
"The new substation will replace an existing substation and will boost the reliability of electricity supplies to customers in the area."