Power system planning and operation is progressively becoming a puzzling issue for both transmission and distribution system operators especially with the emergence of distributed generation (DG). Reverse power flows associated with DGs coupled with the increasing load demand will result in excessive line flows. This will reduce the voltage stability margin (VSM). Thus including voltage stability criteria (VSC) and utilizing the reactive power resources of DGs in power system planning network is very crucial. The paper seeks to demonstrate how DGs with reactive power capability can improve Voltage Collapse Proximity indicator (VCPI). VCPI is a preventive voltage collapse control index developed based on static line stability indices. This index is included in a multi objective optimal power flow together with cost of generation as objective functions. Hence satisfying both the economic and security needs of power system planning. The analysis are done for both stressed and contingency situations. IEEE 14 bus test system with shunt capacitor is used.Index Terms-Distributed generation, genetic algorithm, optimal power flow, voltage stability criteria, voltage collapse proximity indicator.