Abstract Reactive power support and voltage stability are considered to be very essential for preserving system security. This paper proposes a new market-based approach for voltage security constrained active and reactive power pricing. The problem is modeled as a multi-objective OPF in which the social welfare and the distance to voltage collapse point are maximized at same time. An important feature of the proposed approach is using the reactive market power index, Herfindahl–Hirschman Index (HHI), to assign optimal weighting factors of the multi-objective function. In addition, in this method not only the reactive power is considered but typical price is also provided based on real costs. The results show that the proposed method allows market operators and participants to preserve the level of security band social welfare within acceptable range by controlling the weighting factors and monitoring the HHI with regard to reactive market power. Using the proposed method and considering reactive power market, a suitable range of weighting factor can be determined ensuring the optimal bidding as well as satisfying the voltage security of the system.

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