A new model for probabilistic production costing simulation has been developed based on the real economic dispatch. It is well known that the real economic dispatch is performed in accordance with the equal incremental fuel cost rule, when a power system is being operated with n units of generator. There may be maximum outputs, minimum outputs and intermediate outputs, depending upon system conditions. When some units are shutdown, other units should generate more outputs in order to meet the given load. There are normally a large amount output states, since all combination of probabilistic generation states should be considered.No existing methods can reflect such real world operation except Monte-Carlo simulation of which computing effort is known generally to be tremendously great.This paper presents a new concept in the probabilistic production costing simulation. The real economic dispatch is applied and an efficient dispatch procedure is developed. Using the concept of extended effective load, an exact real world simulation has been achieved.Results are compared with those of the available existing methods in sample systems and the usefulness of the proposed approach is demonstrated.It is believed that the proposed one is applicable more favorablly not only to the long - term planning but also the short-term operation simulation.