Regulatory issues in merchant transmission investment

Merchant investment in electricity transmission networks (MTI) is now legally allowed. Predominantly driven by the fear of underinvestment, regulators examine this possibility and given that MTI is a possibility, the regulators face a new set of questions. This paper raises and examines regulatory questions especially from a European institutional framework. The regulatory issues concern the competition effect, the ownership, access regime and the must-offer provision. The paper argues to leave light-handed unregulated MTI light handed and refrain from additional measures. In most cases, it is justified to refrain from sector-specific arrangements because competition law, if necessary at all, will suffice. However, details matter.