Until now, we have considered fairly simple examples pertaining to the economic dispatch problem. In an actual system, there are many variables (other than generated power) that need to be scheduled. These may be set under the direction of a system operator. If the quantity which is to be scheduled belongs to an independent entity, a system operator may "buy" the quantity based on the price at which it is sold.

The formulation of the minimum cost problem, by including the network, reactive power demand, voltage and current constraints is known as an "optimal power flow". Note that optimal power flow takes into account of losses in the network.

Let us consider an optimal power flow problem in which :

a) Control variables (which can be scheduled independently) are the generated real and reactive power

b) Load demand is fixed

c) Cost is a function of only the real power (this assumes that the service of providing reactive power for maintaining voltages is free!)

d) Real powers (control variables) are constrained by maximum limits.

e) Voltage magnitudes (auxiliary variable) is constrained by maximum and minimum limits.

In actual practice, several additional constraints and control variables are present, but for the sake of simplicity let us consider only the ones mentioned above.