Based on the background of retail power market deregulation, the bidding model and power system clearing model are investigated considering traditional power plants, retailing electricity suppliers and virtual power plants participating in the market competition. Based on the marginal cost of traditional power producers and virtual power plants and the marginal revenue of the retailing electricity suppliers, the bidding function model of each entity is established. The piecewise linearization method is used to linearize the continuous bidding function to extract the segment bidding function, which is introduced to the power system clearing model to calculate the optimization results. The testing examples verify the effectiveness of the method.