With an increasing number of regulatory and economic factors making the operation of power systems more challenging, utilities must take full advantage of technological advances which allow more flexibility for operation. One of these advances is the combination of power electronic controllers and compensation devices known as F1exible AC Transmission Systems (FACTS) technology. This thesis will examine the ability of FACTS technology to improve dynamic stability when controlled with data obtained from another recent advancement, phasor measurement units (PMUs). Based on an overview of the relative capabilities of presently available FACTS devices, a specific device will be chosen to be modeled in a dynamic stability study. Eigenvalue sensitivity analysis will be used to determine the optimal placement for this FACTS device in regards to stability for a test power system. Then a state space model will be developed for the FACTS compensated test system, and eigenvalue sensitivity and time-domain methods will be used to determine the optimal controller characteristics for the modeled FACTS device. Stability results will be verified using eigenvalue analysis and time simulation techniques. / Master of Science