Combined estimation of state and feed-back gain for optimal load frequency control is proposed. Load frequency control (LFC) addresses the problem of controlling system frequency in response to disturbance, and is one of main research areas in power system operation. A well acknowledged solution to this problem is feedback stabilization, where the Linear Quadratic Regulator (LQR) based controller computes the feedback gain K from the known system parameters and implements the control, assuming the availability of all the state variables. However, this approach restricts control to cases where the state variables are readily available and the system parameters are steady. Alternatively, by estimating the states continuously from available measurements of some of the states, it can accommodate dynamic changes in the system parameters. The paper proposes the technique of augmenting the state variables with controller gains. This introduces a non-linearity to the augmented system and thereby the estimation is performed using an Extended Kalman Filter. This results in producing controller gains that are capable of controlling the system in response to changes in load demand, system parameter variation and measurement noise.