The transition of the power sector from vertically integrated utility (VIU) to deregulated system has resulted in reshaping of generation, transmission and distribution components. Some of the objectives of restructuring are to ensure a secure and reliable supply of electricity, encourage competition in all segments, sustain future economic and technological growth, etc. There are many challenges that arise in fulfilling these objectives. The thesis addresses some of them related to planning and operational aspects of real and reactive power, covering the following areas: Real power tracing, loss allocation and pricing Reactive power tracing, loss allocation and pricing Power system generation expansion planning Power transfer capability in interregional grids Voltage stability enhancement by improving reactive power margins In deregulated power systems, it has become important to identify the generation and transmission entities responsible in meeting loads. This is done by tracing the power flows through the transmission network. Power tracing is required to assess the extent of network usage by the participants, so as to allocate the transmission losses and charges. Many loss allocation methods are presented in the literature. The loss allocation method implemented in this thesis is a circuit based method. For obtaining the generators contribution towards meeting system loads and transmission losses, an approach of relative electrical distance (RED) between the generation and the load buses, is presented. The method is used to trace both real and reactive power flows. In the case of real power, the generators are the only sources and loads are the only sinks. However, reactive sources and sinks are distributed all along the transmission system. The reactive power sources considered are generators, switchable VAR sources (shunt capacitor banks) and line charging susceptances; and the reactive sinks are shunt reactors and reactive inductive loads. While tracing their flows the actual sources or sinks are to be identified which is obtained after adding reactive injections and absorptions at each bus. If the net value is absorbing, the bus is a reactive sink and if the net value is injecting, the bus is a reactive source. The transmission line charge susceptances contribution to the system’s reactive flows; and its aid extended in reducing the reactive generation at the generator buses is also discussed. A reactive power optimization technique is applied to optimally adjust the reactive controller settings of transformer taps, generator excitations and switched capacitors, so that the available reactive resources can be fully utilized. In the thesis, a methodology for evaluation of real and reactive power load and loss sharing proportions; and cost allocation towards transmission utilization is presented. Due to the ever growing increase in demands; on one hand the existing transmission networks are getting overloaded at some locations and on the other hand, the available generation is becoming insufficient to cater to the additional demand. To handle this problem, generation and transmission expansions become inevitable. Hence, additional public sector units or independent power producers and transmission providers are to be brought in. However in a restructured system, generally there is no central planning for new generation capacity or transmission additions. The reason being, these investments need huge capital and long period of commitment. While making a generation investment decision, expectations concerning future electricity demand, spot market prices, variations of regulatory policies, etc., are the major considerations. The locations, capacities and timing of new power plants are basically at the generation companies’ own discretion. Also, generation companies do not have any obligation to ensure sufficient supply of electricity to meet present and future requirements. Hence, it is a matter of concern as to how adequate generation capacity can be secured in the long run. Optimal siting and sizing of these new generation locations is also an issue of concern. In this thesis a new index called as ‘Tindex’ is proposed, which identifies prospective new generation expansion locations. The index is formulated based on the transmission network information, and it helps in identifying the most suitable new generation expansion locations. To implement this methodology each of the load bus is treated as a generation bus, one at a time, and the maximum generation capacity that can be installed at the location is computed from the approach. This method ensures minimum transmission expansion. Interconnected power systems help in exchanging power from one area to other areas at times of power deficiency in their own area. To enable this, their tieline capability to transfer power has to be sufficient, which is determined using total transfer capability (TTC) computation. TTC is an important index in power markets with large volume of interarea power exchanges and wheeling transactions taking place on an hourly basis. In the thesis, the total transfer capability (TTC) of interconnected tielines, under normal and contingency conditions is evaluated. The contingency cases evaluated are single line contingency, tieline contingency and generator outage. The most critical lines in each zone are identified using Fuzzy set theory. Unified power flow controller (UPFC), a flexible AC transmission system (FACTS) device is incorporated to improve the power transfers under contingency conditions. The best locations for UPFC placement are identified by analysing the power flow results obtained after considering the contingencies. For each of the normal and contingency cases, a base case and a limiting case are formed and the TTC is evaluated. Limiting case is formed by increasing the load in small steps till a point after which bus voltages or line loadings start to violate their stability constraints. To improve the system conditions in the limiting case, reactive power optimization and UPFC installation is carried out. The results reflect the improvement in system conditions and total transfer capability margins. Availability of sufficient generator reactive margins is very essential to ensure system’s voltage stability, without which even minor disturbances may lead to catastrophe. The amount of reactive power margin available in a system determines its proximity to voltage instability under normal and emergency conditions. One way of improving the reactive margin of a synchronous generator, is to reduce the real power generation within its MVA ratings. However this real power reduction will affect the real power contract agreements formed while power trading. The real power contracts are not disturbed and the reactive power margins are improved by optimally adjusting the other available reactive controllers, namely, generator exciter, transformer taps and shunt compensators. To have further control on the reactive flows, UPFC device is incorporated at appropriate locations. The thesis discusses how reactive margins are computed and subsequently improved using a reactive power optimization technique and UPFC. Case studies are carried out on typical sample 6bus, 8bus, 10bus, 16bus, 20bus, IEEE 30bus, IEEE 39bus systems, and reallife equivalents of Indian southern grid 24bus, 72bus, 87bus and 205bus systems to illustrate the proposed approaches.