This paper presents a fractional-order Proportional plus Integral plus Derivative (FOPID) controller in automatic generation control (AGC) of two equal area thermal system under deregulation based on bilateral policy scheme. Appropriate generation rate constraint (GRC) is considered in the system. The performance of FOPID controller is investigated and compared with several integer-order (IO) classical controllers. A maiden attempt is made to apply integer order Proportional plus Integral plus Double Derivative (PIDD) controller in AGC under deregulation that provides better dynamic response among all the IO classical controllers. This paper uses Bacterial Foraging (BF) technique for optimization of several parameters. Studies reveal that FOPID controller provide better dynamic performance in terms of settling time, magnitude oscillation as compared to all the IO controllers.