In this paper, a new class of preconditioners for iterative methods is proposed for the solution of linear equations that arise in the time-domain simulation of the power system. The system of linear equations results from an attempt to solve the differential algebraic equations (DAE) encountered in the power system dynamic simulation. The preconditioners are based on the multifrontal direct methods. The proposed method is compared to the incomplete LU factorization (ILU) based preconditioned iterative methods and other conventional direct linear sparse solvers. The comparison shows the proposed method achieves great computational efficiency relative to these other methods.