This paper is focused on optimization based design methodology and application of PID controller in restructured, competitive electricity market environment, for AGC problem. The paper compares two search algorithms for designing of PID controller used for AGC in multiarea power system. The optimal parameters of PID controller have been determined with the use of Imperialist Competitive Algorithm (ICA). A deregulated scenario has been considered to develop the model of the multiarea AGC scheme. This paper presents that the ICA tuned PID (ICA-PID) controller can optimally regulate the generators output and can provide the best dynamic response of frequency and tie-line power on a load perturbation. The performance of proposed controller has been checked on 2-area thermal power system and 3-area thermal-hydro power system with the consideration of generation rate constraint (GRC). The results obtained by ICA-PID controller and genetic algorithm tuned (GA-PID) controller have been compared on the basis of performance parameters (settling time and oscillations). It is seen that ICA-PID controller shows the better performance as compared to GA-PID controller. (C) 2016 Elsevier B.V. All rights reserved.