The purpose of this work is analysis of common principles of automatic generation control (AGC) operation in new conditions. The various ways are examined concerning implementation of AGC system in the conditions of electricity market. The main attention is devoted to the distributed AGC with flexible structure that is possible to realize on the base of modern control and communication systems. It is proposed the flexible structure of AGC that may be used during different stages of implementation of electricity market. Modeling and simulation were used for investigation of processes of distributed AGC. Proposed AGC control modes may be employed during introduction of electricity market in power systems of Baltic States.