This paper presents a new state estimation method based on the concepts of equivalent measurement model and rectangular coordinate state variables. The bus voltage phasors in rectangular form are considered as the states to be estimated. Actual measurement of voltage magnitude, real and reactive power, and the estimated bus voltage phasors are employed to compute the equivalent measurements, i.e. real part of voltage phasors, and current phasors measurements. With this formulation, the measurement equations can be formulated in a form of linear measurement model. The solution method based on fixed-point iteration technique is also proposed. The error propagation of these equivalent measurements is described. Several IEEE test systems have been used to verify the performance of the proposed method. Numerical experimental results indicate that the proposed method can perform better than the conventional power system state estimation method which uses state variables in polar form.