The transmission expansion planning (TEP) has long term effects on system performance. The effects are irreversible. The conventional optimization techniques have convergence problems for large system and heuristic methods reported so far are not holistic in nature. This paper proposes a two level approach. At first level, the usual static solution using linear approach is proposed. The objective is to minimize the cost along with overloads. The isolated nodes are handled by ZBUS formulation as described. The Genetic Algorithm (GA) is used as a heuristic approach to arrive at results. The plans are shortlisted with no overloads and least cost. The performance is tested for high rank contingencies and appropriate system strengthening is suggested. At second level, further strengthening of the network on short term basis is done with due consideration to reactive power balance in the grid. The reactive power support has to be incorporated since the AC model with reactive power limits can impose convergence problems. To overcome this, Reactive Power Compensation (RPC) enhanced FDLF module with integrated reactive power planning based on set of heuristics is implemented. The TEP plans need to be evaluated for reactive power balance. This is accomplished by evaluating voltage stability margin index (VSMI). It identifies weaker lines prone to reactive power imbalance. The TEP plan reinforces grid to improve the weaker section. The proposed methodology is applied to IEEE 46-bus test system and results are discussed. Power System Simulator (PSS/E) package along with visualization tools are used for validating and portraying the results. © 2008 IEEE.