An attempt is made in this paper to present feasible and practical methods to improve dynamic response of load frequency control problem in a deregulated power system. In the practical environment, access to all of the state variables of system is limited and measuring all of them is also impossible. Access and also measuring the state variable is one of the most problems on application of control methods in real world. To solve this problem, in this paper, two methods with pragmatic viewpoint are proposed. The first method is optimal output feedback control and the second is based on state observer method. In the output feedback method, only the measurable state variables within each control area are required to use for feedback. But when we have fewer sensors available than the number of states or it may be undesirable, expensive, or impossible to directly measure all of the states, using a reduced-order observer is proposed. These proposed designs, which are presented in this paper, have been developed in order to over-come this problem and are tested on a two-area power system considering different contracted scenarios. The results show that when the power demands change, the output feedback method is the most rational technique with the best dynamic response. Also, with using a reduced-order observer, the dynamic response of system is improved. In fact, using these methods is necessary for load frequency control problem in a practical environment. (C) 2009 Elsevier Ltd. All rights reserved.