After liberalization and restructuring of power system, market power of the dominant producers is one of the challenges the market regulators face with. Virtual divestiture is one of the policies implemented to control the market power of the dominant producers in electricity markets. On the other hand, emerging energy storage systems can affect market power studies in electricity markets due to their specific capability, namely switching between production and consumption as needed. In particular, if they are owned by the dominant producer, they can be operated to increase the profit of dominant producer. In this thesis, we propose a framework to assess the market power of a dominant producer in the presence of energy storage systems. For this purpose, we consider an imperfectly competitive day-ahead electricity market where a dominant producer and a number of price-taking small producers compete and the financial divestiture is implemented besides. Two bi-level optimization models are proposed to model optimal offering strategy of the dominant producer. In the first model, the energy storage systems are considered as price-taker in the market. In the upper-level problem, the dominant producer derives optimal offering strategy constrained by the operational limits and conditions stated in the financial virtual divestiture. The lower-level problem models the market clearing conditions in the presence of the price-taking energy storage systems. In the second model, it is assumed that the energy storage systems are owned and operated by the dominant firm and conditions stated in the financial virtual divestiture. In the upper-level, the dominant producer maximizes its profit, subject to operational limits while the lower-level problem represents the market clearing conditions. We convert each bi-level optimization problem into a mathematical programming with equilibrium constraints (MPEC). Then the MPEC is recast as a mixed-integer linear programming problem using linearization techniques. Different case studies are provided to highlight impacts of energy storage systems on market power under financial virtual divestiture. Keywords Market Power, Energy Storage Systems, Financial Virtual Divestiture, Mathematical Programming with Equilibrium Constraints