Iran has halted supply of electricity to neighbour Iraq since the beginning of 2017.
Tehran alleges that the electricity export contract expired at the end of last year.
The power export deal between Iran and Iraq has expired. This is the main reason for cutting power exports to Iraq, said Arash Kordi, managing director at Iran Power Generation, Distribution and Transmission Company (Tavanir), in comments reported by the Iranian Students News Agency.
Iraqi electricity officials have alleged that the supply was stopped without prior notification and was over unpaid bills, which had exceeded over $1bn.
Kordi has said that a new contract would be drafted taking into account changing currency rates and measures would be discussed to settle Baghdads debts.
According to Iranian business daily Financial Tribune, Iraq imported 800 to 1,000 megawatts of electricity from Iran under the previous contract.
The report added that Iran had previously suspended electricity supplies to Iraq in April 2015 over unpaid dues.
The move comes days after Turkmenistan suspended supply of gas to Iran over non-payment of dues.
Baghdad suffers from chronic power outages, particularly during the peak summer months leading to mass protests and unrest.