In a deregulated electric service environment, an effective electric transmission and distribution networks are vital to the competitive environment of reliable electric service. Power quality (PQ) is an item of steadily increasing concern in power transmission and distribution. The traditional approach to overcoming capacity and quality limitations in power transmission and distribution in many cases is the addition of new transmission and/or generating capacity. This, however, may not be practicable or desirable in the real case, for many of reasons. From technical, economical and environmental points of view, there are two important - and most of the time combined - alternatives for building new transmission or distribution networks to enhance the transmission system capacity, and power quality: the Flexible alternating current transmission devices and controllers, and the distributed generation resources near the load centers. The connection of distributed generation to the distribution grid may influence the stability of the power system, i.e. angle, frequency and voltage stability. It might also have an impact on the protection selectivity, and the frequency and voltage control in the system. This paper presents a low cost FACTS based Dynamic Distribution System Compensator (DDSC) scheme for voltage stabilization and power transfer and quality enhancement of the distribution feeders connected to a dispersed wind generator, using MATLAB/ SimPower System simulation tool.