In this paper, we formulate the design harmonic fi lter problem taking by considering investment cost and operational constraints. System quality can generally be achieved by installing harmonic fi lters in industry systems, thereby reducing the harmonics. Users prioritize the performance and cost of fi lters as primary concerns. This new formulation uses a combinatorial optimization problem with a non-diff erentiable objective function. A solution methodology based on an optimization technique-simulated annealing is also proposed to determine the size of fi lters with minimum cost. As a result, the proposed solution methodology can off er the optimal size and minimum cost of design fi lters. In conclusion, a solution algorithm is developed to derive the global optimal solution and test on a 69kV industrial power system with highly promising results.