The traditional power system is facing significant transformations due to the integration of emerging technologies, renewable energy sources (RES), and storage devices. This review focuses on the shift from centralized to decentralized control, enhancing flexibility for stakeholders, and the challenges it entails. The paper identifies the problem of limited adaptability in traditional power systems, which restricts stakeholder flexibility and renewable energy source integration. To address this, the paper proposes a transition to a decentralized system. It explores the effects of power system privatization and restructuring, fostering a competitive market across generation, transmission, and distribution levels. It discusses how integrating distributed generations (DGs) and demand-side management (DSM) with ICT protocols can enhance power system control and management efficiency and reliability. The review delves into the challenges of deregulated electricity market (DEM), especially integrating new generation sources and promoting prosumer participation. It proposes leveraging DSM to manage supply–demand variability and support renewable generation integration in distribution sectors. It also discusses the necessity for renewable power producers to develop effective market bidding strategies. The review concludes with key findings and future research directions, providing an overview of the evolving energy market’s trajectory. It aims to inform sustainable and efficient power system discourse and future policy and decision-making.