Summary
This article analyzed the performance of coordinated interline power flow controller (IPFC) and power system stabilizer (PSS) in the combined two‐area restructured automatic load frequency control (ALFC) and automatic voltage regulator (AVR) system. Each area of the system has three generating companies as reheat thermal, wind, and diesel and three distribution companies (DISCOs). Appropriate physical constraints are included in thermal plant. Proportional plus fractional integral plus derivative with filter (PIλDF) controller is introduced as secondary controller for both ALFC and AVR loop. Lightning search algorithm is employed for optimization of the parameters of controller as well as PSS. The control performance of the proposed controller is compared with some classical integer‐order controllers and reflects the dominance of the former over others with less peak deviation, settling time, and figure of demerit in all three transactions of restructured power system. The investigation of the impact of combined controlling action of IPFC and PSS reveals that the integration of the same improves the system dynamics effectively than the individual inclusion of IPFC and PSS. The coordinated IPFC‐PSS provides less peak deviation, oscillation, as well as faster settling time and enhances the system performance. The sensitivity analysis of PIλDF controller and PSS parameters for different DISCO participation matrix and amount of contract violation derived the robustness of the same.