With the unbalanced distribution of regional resources and the imbalance in economic development and electricity consumption, a large amount of high quality and lower price electricity from small hydro-powers can only sell out through large power grid. And conflict between local and provincial power grid makes the lower price electricity from local small hydro-powers difficult to sell out, leading to the nonoptimal allocation of resources. In this paper, we propose the term of ldquovirtual electricityrdquo and we think that it is an effective way to the optimal allocation and rational utilization of electricity resources by developing virtual electricity trade. A game-based model is set up to analyze the profit relationship among local power networks, provincial power grid corporation, and major electricity customers. The result of solving the model shows that when the selling price of small hydro-power lowers to a certain extent and the reliability differs a little from provincial power grid, the virtual electricity trade not only can solve the problem of difficult-selling of lower price electricity, but also can promote the reliability and safety of local electric power networks and improve the utilization efficiency of small hydropower resources.