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This paper presents control methodology of UPFC (unified power flow controller) for stable operation of distributed generators on distribution system. The UPFC consists of two parts, shunt and series compensation parts. The shunt part controls the power flow from the power system to be constant. The series part compensates unbalanced voltage and voltage sag. In addition, the proposed UPFC keeps operation of distributed generators during fault by introducing isolated operation. The effectiveness of the proposed method is verified by using MATLABÂ®/Simulink.