Ancillary services (AS) management has become an important issue to be addressed in the Indian power system after adaption of the restructuring and unbundling processes following the enactment of Indian Electricity Act 2003. In an electricity market, frequency regulation is one of the ancillary services, which must be procured by the system operator (SO) from the market participants by some regulatory mechanism or using market-based approaches. It is important for the SO to optimally procure this service from the AS market. in this paper, an approach for determining the optimal frequency regulation service procurement has been proposed for equitable payment to generators and recovery from the customers. The effectiveness of the proposed method has been demonstrated on a practical Northern Regional Electricity Board (NREB) system of India. (C) 2009 Elsevier Ltd. All rights reserved.