Statnett is a transmission system operator. This means that the company facilitates the power market by making it physically possible to transport power from sellers to buyers. Statnett makes the transport grid available by planning, constructing and operating it in accordance with both political and physical laws. The physical laws dictate for example that power cannot be stored, and that there must be balance between the production and consumption of power at all times.

Statnett is also responsible for keeping the Norwegian power system in balance, and thus it is responsible for the overall physical management and control of the national power system. Technically this means that the frequency is maintained at 50 Hz.

If the consumption exceeds the production, then the frequency will drop to less than 50 Hz. As the transmission system operator, Statnett must call a producer and ask him to "input more power into the grid" or ask a consumer to use less.

If the production is too great and it exceeds the consumption, then the frequency will increase to over 50 Hz. Statnett must call a producer than and ask him to "input less power into the grid":

The volume of power that Statnett trades in this manner is called regulating power. Statnett chooses who will change their production or consumption based on a price offer that the producers and consumers have given for this. The producer or consumer who has given the lowest price for the change that is required will be chosen.

The transmission system operator is at the same time responsible for ensuring that the transport grid used is constructed in accordance with the market's needs and that socioeconomic criteria are used for the solutions that are selected. The transmission system operators may weigh different solutions such as agreements to disconnect consumption and the construction of new power lines up against each other and choose the most profitable on the basis of an overall socioeconomic assessment.

It is important that the transmission system operator is neutral and independent in relation to the market participants, so that the company can facilitate the market without itself having a financial interest in relation to the production or consumption. It is at the same time important that the company has the financial strength, technical know-how and skills required so that no individual participant is given an opportunity to exert market power.

In Norway, Statnett is the transmission system operator. In Sweden, Svenska Kraftnät, which is owned by the Swedish government, is the transmission system operator. In Finland, Fingrid, which is partly government owned, fills this role. In Western Denmark the transmission system operator is Eltra, which is owned by the local grid companies in Western Denmark, while Elkraft System, which is also owned by the local grid companies, is the transmission system operator in Eastern Denmark.