Part I of this article focuses on the frequency regulation ancillary service and proposes a competitive way to provide this service through price-based and bilateral contracts between Gencos and Discos. The dynamic performance of the charged-bilateral structure is analyzed through a simulation of a step-load disturbance to examine its regulation capabilities for normal operating load and contract violation issues. Part II reports the design of the effective and robust controller for the Part I model and investigates for the integral, dual, and fuzzy controllers with an area control error (ACE)-linked pricing scheme. The simulation results show that fuzzy logic controller performance is better and more robust than the other controllers.