Var/power factor control for generators has often been the preferred operating control mode for pulp and paper power plants over voltage regulation to reduce the need for constant reactive power monitoring by plant operators. Today, for those machines located in the Western United States, the North American Reliability Council (NEPC) and Western Electric Co-coordinating Council (WECC) are ruling that machines rated more than 35 MVA or group of machines equal to or more than 75 MVA connected to the transmission grid through one transformer be operating in voltage regulating mode and be equipped with power system stabilizer to improve the transient stability of the system. The latest NERC and WECC standards do not allow for generators meeting these criteria to be operating in Var/power factor control. Over the years various types of Var/PF control have been provided. Two types of Var/PF controllers are available as described in IEEE 421.5. Type 1 Var/PF controller uses raise/lower signal based on generator output changes. The amount of raise/lower signal is a fixed voltage. The Var/PF controller of type 2 uses a PI controller, which changes a desired voltage setpoint smoothly in linear fashion. Both types are considered as a summing point type Var/PF controller. In this paper, the PSS performance is studied with type 2 Var/PF controller that does not have an undesirable PSS action caused by a sudden change in setpoint adjustment from the Var controller. The results illustrate that power system stabilizer performance is not deteriorated when the type 2 Var/PF control is implemented. This type of performance response can benefit pulp and paper mills who desire constant VAR/PF control but also requiring to meet the WECC regulation guidelines