2.1. Basic mechanisms

The European power transmission network is recognised as an important factor
for economic and social well-being. Within a country, system operators usually
have geographical separation and, as a consequence, local monopoly status. Transmission
systems are capital intensive, sized to meet demand, and fixed in nature, making
it unlikely that any competition could arise to control prices.

Due to the central importance of energy and the natural monopoly status of
the transmission system operator, transmission networks are regulated to maintain
acceptable standards for stakeholders and prevent the disproportionate exercise
of economic power by operators.

Multiple Requirements of Power Transmission

A power transmission system must reliably and cost effectively deliver power
to customers while ensuring the return on investment required by the transmission
system operator. Regulators attempt to achieve this balance through:

• Ensuring a safe and reliable transmission system by working with industry
  and consumer stakeholders to set and enforce meeting minimum reliability criteria;
• Agreeing with system operators on a set of overall cost effective investment
  guidelines linked to meeting the minimum reliability criteria;
• Working with broader stakeholders to balance the costs of transmission system
  investments with social, economic and environmental considerations;
• Ensuring that the system can respond to national imperatives to assist in
  the delivery of diverse and environmentally responsive primary sources of
  energy;
• Working with stakeholders concerned with national development to ensure
  that transmission solutions are used and expanded efficiently; and
• Maintaining regulatory oversight to ensure that balances are evolved to
  meet changing circumstances over time.