This paper presents a developed algorithm for optimal placement of thyristor controlled series capacitors (TCSC’s) for enhancing the power system static security and minimizing the system overall power loss. Placing TCSC’s at selected branches requires analysis of the system behavior under all possible contingencies. A selective procedure to determine the locations and settings of the thyristor controlled series capacitors is presented. The locations are determined by evaluating contingency sensitivity index (CSI) for a given power system branch for a given number of contingencies. This criterion is then used to develop branches prioritizing index in order to rank the system branches possible for placement of the thyristor controlled series capacitors. Optimal settings of TCSC’s are determined by the optimization technique of simulated annealing (SA), where settings are chosen to minimize the overall power system losses. The goal of the developed methodology is to enhance power system static security by alleviating/eliminating overloads on the transmission lines and maintaining the voltages at all load buses within their specified limits through the optimal placement and setting of TCSC’s under single and double line outage network contingencies. The proposed algorithm is examined using different IEEE standard test systems to shown its superiority in enhancing the system static security and minimizing the system losses.