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Due to environmental and economical constraints, it is difficult to build new power lines and to reinforce the existing ones. The continued growth in demand for electric power be met by increased loading of available lines. A consequence of this is reduction of power system damping, leading to a risk of poorly damped power oscillations between generators. This thesis proposes the use of controlled active and reactive power to increase damping of such electro-mechanical oscillations. The focus of this work is to analyze the dynamic performance of the Unified Power Flow Controller (UPFC). Reactive power compensation is a main predicament in the control of electric power system. Reactive power from the source increases the transmission losses and decreases the power transmission aptitude of the transmission lines. Reactive power must not be transmitted throughout the transmission line to a longer distance. Flexible AC Transmission Systems (FACTS) devices such as static compensator (STATCOM) unified power flow controller (UPFC) and static volt-ampere compensator (SVC) are worn to effortlessness these problems.