Squares (RLS) identification algorithm and Kalman Filter as a parameters estimator are used for on-line model identification to obtain a dynamic equivalent model of the system. The two methods are compared to determine the most appropriate identification algorithm for this application. The PS controller is then adapted using the identified model. The proposed technique is tested on a single machine infinite bus system and a fifth-order multi-machine system. The results obtained demonstrate improvement in the overall system damping characteristics by applying the proposed adaptive controller as well as an enhancement of the power system stability in comparison to the conventional controller. Index Terms-Adaptive PS Controller, Kalman Filter Estimator, RLS Algorithm, SVC. SVC G B 615 978-1-4244-1726-1/07/$25.00 c 2007 IEEE T K svc svc s B