Modern power systems are largely based on renewable energy sources, especially wind power. However, wind power, due to its intermittent nature and associated forecasting errors, requires an additional amount of balancing power provided through the automatic generation control (AGC) system. In normal operation, AGC dispatch is based on the fixed participation factor taking into account only the economic operation of generating units. However, large-scale injection of additional reserves results in large fluctuations of line power flows, which may overload the line and subsequently reduce the system security if AGC follows the fixed participation factor’s criteria. Therefore, to prevent the transmission line overloading, a dynamic dispatch strategy is required for the AGC system considering the capacities of the transmission lines along with the economic operation of generating units. This paper proposes a real-time dynamic AGC dispatch strategy, which protects the transmission line from overloading during the power dispatch process in an active power balancing operation. The proposed method optimizes the control of the AGC dispatch order to prevent power overflows in the transmission lines, which is achieved by considering how the output change of each generating unit affects the power flow in the associated bus system. Simulations are performed in Dig SILENT software by developing a 5 machine 8 bus Pakistan’s power system model integrating thermal power plant units, gas turbines, and wind power plant systems. Results show that the proposed AGC design efficiently avoids the transmission line congestions in highly wind-integrated power along with the economic operation of generating units.