Unified Power Flow Controller (UPFC) is a FACTS device which can fulfil multiple power flow control objectives such as needs of reactive shunt compensation, phase shifting and series compensation. However UPFCs are quite expensive and therefore are not widely used. In this paper the potential of Plug in Hybrid Electric Vehicles (PHEV) in a V2G mode of operation is explained, which gives a low-cost solution for designing a virtual UPFC using PHEV charging station. A third order dynamic battery model is used here to represent the PHEV. Simulations have been carried out and demonstrated that PHEVs have the potential to work as a virtual UPFC to improve power quality.