A method for short term operation planning and power interchange scheduling of interconnected hydro—thermal power systems is proposed in the paper. The criterion function is the total variable profit obtained by sales of energy to customers within the system, interchange of energy with other systems and system operation. The method is based on Lagrangian relaxation, decomposition technique and successive solution of dual and primal problems. The dual and primal problems are decomposed and solved using appropriate optimization methods, while Lagrangian multipliers are corrected using subgradient method. The efficiency of the method is illustrated on a test power system.