The structure of IREMA obliges the monopoly in the transmission sector. Regional Electricity Companies (RECs) take three different roles in IREMA, namely, as buyers, as sellers, and as transmission companies. Each REC manages the transmission system within its geographical area. It owns the transmission system assets such as the transmission lines, cables, transformers and reactive compensation devices. Tavanir, as a governmental agent, owns all of these companies and, indirectly, own the transmission sector.

Transmission System Cost

As mentioned above, Transmission sector in IREMA is totally state-owned and regulated. The RECs, receive the availability payment (proportional to their total transmission capability) and the energy-flow payment dependent on the voltage level, length (for the transmission lines and cables) and the regulated transmission rates.

Thus the policy of IERB regarding the transmission grid is to provide sufficient revenue for the transmission companies in order to operate, renew and expand the transmission grid. In fact this is a cost based transmission system remuneration. The capacity tariffs ($/MW/km) and the energy-flow tariffs ($/MWh/km) are demonstrated by the minister of energy.

Transmission cost allocation

A fair transmission cost allocation scheme must consider the contribution of the users to the power flow in the transmission asset. In IREMA, the transmission costs, including the capacity and energy-flow cost, are allocated to the transmission users based on their usage.

The concept of energy hub

Several methods have been proposed to allocate the transmission costs to the market players. Locational marginal prices are one of the most common procedures for this purpose. However, LMP are calculated after the fact. It means that, the prices are not determined for the parties before the physical delivery of power. This is not welcome in electricity markets where long term contracts and power exchange trading environment are under development.

The energy hub concept

In IREMA, a method is used in which the prices associated to the out of market trades could be determinable. In addition the effect of losses, should not affect the out of market trading volumes. To do so, the energy hub concept has been wielded in IREMA. It is assumed that the system is linear. We extract the system snapshots in which the value of state variables of power system are derived. Using the system snapshots, an average state is determined for the power system. By considering the effects of incremental change of power injection in each buses (consumption and generation) with respect to the average state, on transmission line flows and system losses, the share of each market player in using the transmission system is calculated. It is remarkable that the share of market players in transmission system usage is calculated based on the real transmission system topology. So, our method should not be confused with contraction patch method of transmission cost allocation. Using this method, the physical and economical characteristics of electricity market are decupled. In fact, sellers give their generated power to the RECs that act as the transportation system remunerated by predetermined (regulated) rates. RECs deliver the generated power to the delivery point (energy hub). The energy hub is an artificial point in which all of the trades are established in IREMA. The cost of power transportation is proportional to the share of each sellers in using the transmission facilities. Buyers, also pay the transmission costs with predetermined (regulated) rates to the RECs to transport their demand form the energy hub to the point of their connection to the grid.