In this thesis, methods of charging for the transmission system and optimising the expansion of the transmission network under the competitive power market are described. The first part of this thesis considers transmission tariff design. In the proposed approach, not only is all the necessary investment in the transmission system recovered, but also an absolute economic signal is offered which is very useful in the competitive power market. A fair power market opportunity is given to every participant by the new nodal-use method. The second part of this thesis considers transmission system expansion. All the tests are based on the Three Gorges Project in China. In this thesis, to optimally expand the transmission system, the LMP (Locational Marginal Price) selection method and the CBEP (Congestion-Based transmission system Expansion Planning) method are introduced. The LMP selection method is used to select optional plans for transmission system expansion. It is especially suitable for large transmission systems. The outstanding advantages of the LMP selection method are simplicity and computational efficiency. The CBEP method produces the optimal system expansion plan. For the first time, generation congestion and transmission congestion are separated within the system expansion problem. For this reason the CBEP method can be used in a supply-side power market and is suitable for the Chinese power market. In this thesis, the issue of how to relax the congestion in the transmission system have been solved. The transmission system can obtain enough income to recover the total required cost. For this reason more and more investment will come into the transmission system from investors. The risk for the independent generators is also under control in the CBEP method. Even when the system is congested, the uncertainty of LMP is taken into consideration.