Distributed generation (DG) and electric vehicle (EV) are increasingly installed in the modern microgrids (MGs). This demands for an improvement in the power handling capacity of the existing distribution feeders. The power handling capacity of a feeder is limited by the voltage magnitude violation caused by overloading. The smart transformer (ST) is proposed as an effective solution for improving the performance of modern MG. This paper utilizes the power management capabilities of the ST with an integrated battery energy storage system (BESS) for improving the power handling capacity of a medium voltage (MV) 5-bus radial feeder. The proposed method demonstrates the ST's capability to control the active and/or reactive power flow at the MV grid for maintaining the steady-state voltage magnitude within the grid-specified limit. A sensitivity analysis based design study is proposed to determine the power rating requirements for different ST and BESS converters during distinct power control scenarios. The analysis shows the capability of ST in injecting/absorbing active and reactive powers in flexible combinations for achieving the desired voltage magnitudes. The findings are verified through simulation and experimental results.INDEX TERMS Power handling capacity, power management, smart transformer (ST). HRISHIKESAN V. M. (Student Member, IEEE) received the B.Tech. degree in electrical and electronics engineering from the Government Engineering College, Thrissur, India, in 2011, and the M.Tech. degree in power systems from the