This paper describes a methodology for secure economic operation of power system accounting emission constraint areawise as well as in totality. Davidon-Fletcher-Powell's method of optimization has been used. Inequality constraints are accounted for by a penalty function. Sensitivity coefficients have been used to evaluate the gradient vector as well as for the calculation of incremental transmission loss (ITL). AC load flow results are required in the beginning only. The algorithm has been tested on IEEE 14- and 25-bus test systems.