It was in 1992 that the first activities were observed in Iran toward the decentralization of electricity industry. In this regard, independent generation management companies were established. New generation facilities were going to develop based on two major contract types "Building, Operation and Ownership" and "Building, Operation and Transfer" the BOO and BOT respectively. In BOO contract as its name says, the building, operation and ownership of generation facilities belongs to a certain party from beginning to the end. Conversely in BOT, the building and operation of the generation facilities were done by a party and finally the ownership was transferred to the governments. Distribution companies were also separated in 1994 and began their official activities. Similar to other countries convinced to proceed the power system restructuring revolution, there were several motivations for the power system restructuring in Iran. They are as follows (Fig. 1):

It was in late 2001 that Iran Electricity Regulatory Board (IERB) was established. The main activities of this committee were to study the existing electricity markets of the other countries. The goal of those studies was to exploit the past experiences in the world. After all, the model of IEM was proposed and based on this model, the "buying and selling electricity regulations" was legislated by the council of ministers in September 2003. Finally it was in 23th November 2003 that the IEM officially begins to work, the market providing a competitive environment for selling trading electric power. Following to this newly born electricity market, Iran Grid Management Company (IGMC) was established in fall 2004.

In fact this is the turning point of power system restructuring in Iran. This company functions as the power system operator and the market operator. Fig. 2 illustrates what has been saying so far.

In Iran, the electricity trades are performed in three major environments, the day-ahead market, the power exchange, and bilateral contract. Fig 3 illustrates main building blocks of IEM.

In the day ahead market an auction is established for the generation companies (GENCOs) with pay as bid mechanism. GENCOs submit their bids the day before delivery of power. The sellers' bids consist of the prices and the quantities. The customers only submit their quantity of demand. As a matter of fact, this mechanism is a single sided auction for the sellers. Market operator clears the market based on the submitted bids of GENCOs and buyers' demand. For inciting the players to develop the generation system capacity, the capacity payment mechanism is included to the IEM. These payments are made to the generation units regardless of being a winner in the auction for selling the energy or not. A price cap is also determined by the regulatory committee limiting the sellers' maximum bidding price. Fig 4. gives the main specifications of day ahead electricity market. The cost of system losses is allocated to the customers and the sellers based on their contribution on the power system total loss. In fact a flow based loss and transmission cost allocation is performed in IEM.

In the power exchange, the trades are categorized as the future contracts leading to power delivery. The buyer and sellers match their bids and offers for a certain quantity of power and the delivery of power will be in the time to come. They are free to make decisions about the prices and there will not be an intervention on their decisions. It should be noted that only the private GENCOs have the authority to participate in the power exchange and sell their power. There is also a limit on the maximum authorized power that could be sold in the power exchange for each generation unit. The quantity of power which is sold in the power exchange will be omitted from the sellers' bidding curves in the day ahead market clearing process. The buyers also will not imposed to pay any additional cost after the day ahead market settlement, for the power that they purchased in the power exchange itself. Fig. 5 gives the main specification of power exchange.

Buyers and sellers are authorized to trade bilaterally. Although the trades need to be approved by the system operator, they are free to negotiate about the prices and quantities. It is remarkable that most of these trades are based on long term contracts.

As is mentioned before, IEM is cleared based on a single sided auction. Sellers competitively submit their bids and IGMC, on behalf of buyers, purchases their demanded power. Transmission cost is allocated to the transmission system users based on their usage. This mechanism is traceable by considering the payments. Table. I illustrates the total payment and total energy statistics to give a brief financial description of IEM for a year (2012-2013). Yearly average prices could also be helpful in this regard. Table II, illustrates the average purchasing price of electricity, average price of transmission service, average capacity payment price and average selling price of electricity to the buyers.

To have a better view of an electricity market, it is worthwhile to know about the power producers consisting major part of market players. In Iran, the total installed generation capacity, which is derived based on nominal power, is more than 68.9 GW (until March 2013). It is remarkable that total measured generated energy was about 251 GWh for March 2013 to February 2014. 144 power plants consist Iran generation system that 25 of them are state owned or private companies. The contributions of installed power plant technologies consisting Iran generation system are depicted in

Iran has electrical connection to some of its neighboring countries. Total annual import and export in year 1391 (2012-2013) were 3.9 GWh and more than 11 GWh respectively. Fig. 8 and Fig. 9 illustrate the portfolio of Iran electricity trade with its neighbors.

In IEM the main customers are distribution companies (DISCOs) who purchase the energy in the wholesale market and sell it to their customers. Regional electricity companies who principally act as transmission companies (Transcos), also take the role of energy purchaser in the wholesale electricity market. The last energy purchaser in the wholesale electricity market is Tavanir who purchases the energy for export.

Transmission system is where the physical power transaction should be taken place. In fact, transmission system is the key element of power system and also power market, a physical system that may impose limitations or provide opportunities for the market players. Open access to the transmission system is important for providing all the players, a fair access to the electricity market opportunities. It should be noted that this open access is guaranteed by law. Table. III and IV, illustrates the statistics indicating the development of transmission system besides the system which is currently operating. It is remarkable that there are 16 totally state-owned transmission companies which are responsible for planning as well as expansion of the transmission system.