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The efficient and optimum economic operation and planning of electric power generation systems have always occupied an important position in the electric power industry. Main aim of electric power utilities is to provide high quality, reliable power supply to the consumers at the lowest possible cost while operating to meet the limits and constraints imposed on the generating units. This formulates the optimal power flow problem for finding the optimal combination of the output power of all the online generating units that minimizes the total production cost, while satisfying all the constraint. In this paper we use the Power System Analysis tool box in MATLAB to minimize the cost of electricity with optimal power flow for the southern grid of Kerala State Electricity Board. The paper concentrates on the savings with the incorporation of a wind farm in the system. The losses are also reduced with the application.