The system operator of a large power transmission network must ensure that power is delivered whenever there is demand in order to maintain highly reliable electric service. To fulfill this mandate, the system operator must procure reserve capacity to respond to unforeseen events such as an unexpected surge in demand. This paper constructs a centralized optimal solution for a power network model by generalizing recent techniques for the centralized optimal control of demand-driven production systems. The optimal solution indicates how reserves must be adjusted according to environmental factors including variability, and the ramping-rate constraints on generation. Sensitivity to transmission constraints is addressed through the construction of an effective cost on an aggregate model. (c) 2006 Elsevier Ltd. All rights reserved.