Abstract: “Deregulation is the collection of restructured rules and economic incentives that governments set up to control and drive the electric power industry. There are crucial differences between the AGC operation in a vertically integrated industry and horizontally integrated industry. A reduced-order controller has been proposed to solve the automatic generation control problem in a deregulated power system that operates under deregulation based on the bilateral policy scheme. In the real world environment, access to all of the state variables of system is limited and measuring all of them is also impossible. So when we have fewer sensors available than the number of states or it may be undesirable, expensive, or impossible to directly measure all of the states, using a reduced-order controller was used. In this paper a new controller has been proposed to overcome the above difficulty. The proposed strategy has been tested on a two-area reheat thermal-hydro power system under De-Regulated e”

Keywords: De-regulated power systems, GENCOs, DISCOs, LFC and model matching controller.