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This paper presents a unified method for optimal real and reactive power dispatch for the economic operation of power systems. As in other methods, the problem is decomposed into a P-optimization module and a Q-optimization module, but in this method both modules use the same generation cost objective function. The control variables are generator real power outputs for the real power module; and generator reactive power outputs, shunt capacitors/reactors, and transformer tap settings for the reactive power module. The constraints are the operating limits of the control variables, power line flows, and bus voltages.