This paper proposes a new multistage AC model for transmission expansion planning that finds an optimal combination of transmission lines, fault current‐limiting high‐temperature superconducting cables, and multiple distributed generations (DGs). On this basis, the proposed model, from a new perspective, allows for simultaneous improvement of the short‐circuit level and grid‐scale flexibility (GFLX) under both normal and fault conditions. The objective function to be minimized includes not only the net present worth of the total investment and operation costs but also the congestion‐induced GFLX degradation measure. This model also takes the AC power balance and flow relationships, equipment capacity limits, nodal voltage bounds, DG penetration level limit, as well as discrete logical and financial restrictions together into account with the short‐circuit level constraint. To overcome the complexity of solving the resultant non‐convex mixed‐integer non‐linear optimization problem, a multi‐objective integer‐coded melody search algorithm is employed, followed by a fuzzy satisfying decision‐making mechanism to obtain the final optimal solution. The exhaustive case studies conducted on the IEEE 24‐ and 118‐bus test systems verify the efficacy of the newly developed model in terms of cost‐effectiveness, flexibility, and short‐circuit level suppression when facing different normal and fault conditions.