This paper discusses the power quality benefits for transmission systems by integrating flexible ac transmission system (FACTS) controller with superconducting magnetic energy storage. The paper discusses the incorporation of a superconducting Magnetic Energy Storage (SMES) coil into a voltage source inverter based static synchronous compensator (STATCOM) in damping dynamic oscillations in power systems. A 100 MJ 96 MW (peak) SMES coil is attached to the voltage source inverter front end of a 160 MVA STATCOM via a de-de chopper. The performance of the STATCOM, a self-commutated solid-state voltage converter, can be improved with the addition of energy storage. The real and reactive power responses of the integrated system to system oscillations are studied using an electromagnetic transient program PSCAD(TM)/EMTDC(TM) and the findings are presented. The results show that, depending on the location of the STATCOM-SMES combination, simultaneous control of real and reactive power can improve system stability and power quality of a transmission grid.