This paper proposes an optimization model to maximize social welfare by standardizing the operating conditions with an overall improvement of dynamic stability of power markets endowed with Smart Grid communication technology. The state space based model developed along with the proposed methodology maximizes load catering and simultaneously minimizes the operating standard constrained generation cost to restore power market equilibrium even in the most inadvertent states of the Energy System Network. For optimum utilization of smart metering facility, the model effectively involves resources like demand response, generation surplus and an efficient methodology to optimize the Market Clearing Price (MCP) as well as profit of the market participants by effective categorization. The power market dynamic price equilibrium has been estimated by forming Jacobian of the sensitivity matrix to regulate the state variables for the standardization of the quality of solution. A novel load curtailment strategy has also been proposed to amalgam stability restoring shedding with profit retentive load cut. The model has been tested in IEEE 30 bus system in comparison with standard curtailment based optimization technique to produce encouraging results.