The performance of power systems decreases with the size, the loading and the complexity of the networks. This is related to problems with load flow, power oscillations and voltage quality. Such problems are even deepened by the changing situations resulting from deregulation of the electrical power markets, where contractual power flows do no more follow the initial design criteria of the existing network configuration. Additional problems can arise in case of large system interconnections, especially when the connecting AC links are weak. FACTS devices, however, provide the necessary features to avoid technical problems in the power systems and they increase the transmission efficiency. This paper presents a study on the design of a shunt connected FACTS device (STATCOM) and investigates the application of this device to control voltage dynamics and to damp out the oscillation in electric power system. STATCOM is one of the key shunt controllers in flexible alternating current transmission system (FACTS) to control the transmission line voltage and can be used to enhance the load ability of transmission line and extend the voltage stability margin. In this paper, the proposed shunt controller based on the voltage source converter topology as it is conventionally realized by VSC that can generate controllable current directly at its output terminal. The performance and behavior of this shunt controller is tested in 3-machine 9-bus system as well as the performance is compared in the test system with and without STATCOM at three cases in MATLAB/Simulink. Simulation results prove that the modeled shunt controller is capable to improve the Power quality significantly.