Indian power systems are designed to operate at a nominal frequency of 50 Hz. They face hourly demands that exceed their generation capacity during certain hours of a day and operate at a lower frequency in those hours. In general, each state (province) has an electric utility with a generation capacity that comprises: (i) state (provincial) government owned generation plants, (ii) independent power producers (IPPs) and (iii) assigned portion of outputs of central (federal) government owned generation plants. The state government and central government plants and IPPs offer to sell energy to a State's utility through offer bids. A State's utility may draw additional power from a central generator in excess of its assigned portion of output and it is termed as an un-scheduled interchange (UI). The utility will pay for this UI to the central generator using an hourly tariff rate known as availability-based tariff (ABT). ABT is a function of the operating frequency. This study captures this operational model, ABT structure and proposes a mixed integer linear-programming formulation to optimally commit and schedule units in the utility for 24 h. The proposed model and results on actual data are reported. The system includes a pumped-hydro unit. © 2011 The Institution of Engineering and Technology.