This paper deals with load-frequency control of an interconnected hydro-thermal system considering battery energy storage (BES) system. A new area control error (ACEN) based on tie-power deviation, frequency deviation, time error and inadvertent interchange (unscheduled energy transfer) is used for the control of the BES system. Time domain simulations are used to study the performance of the power system and the BES system. Results reveal that BES meets sudden requirements of real power load and is very effective in reducing the peak deviations of frequencies, tie-power, time errors and inadvertent interchange accumulations.