In a deregulated power system regulating the ancillary services is one of the most important issues. The present work focuses on regulating load frequency control ancillary service in a deregulated scenario with integration of potentially developing combined cycle gas fired power plants. A conventional Proportional Integral and derivative controller is used as a supplementary controller to optimize the regulation using Meta heuristic firefly algorithm. Using ITAE as performance criteria to be optimize, the PID controller parameters: proportional (K p ), Integral (K i ), and Derivative (K d ) gains are optimized using the proposed Algorithm by considering the possible feasible bilateral contracts between the various DISCOs and GENCOs of the deregulated power system. The proposed control strategy is investigated on a two-area interconnected power system consisting of Hydro-Thermal unit in the area-I and Thermal-Gas unit in area-II. The main objective of optimization is to improve the dynamics of LFC such as improving of the transient response of frequency and tie-line power oscillations and to optimizing the Power generated by various GENCOs according to the scheduled bilateral contracts. The simulation results show the PID controller tuned by Firefly algorithm (FA) exhibits a considerable improvement in dynamic performance of LFC.