With the expected surge of Electric Vehicles (EV) in the market in the near future, a threat to the grid is anticipated. Introducing EVs in the grid serves as an additional load thus arising the need for increased generation which increases the total fuel cost. An optimization algorithm has been proposed to minimize the total fuel cost by performing Economic Load Dispatch (ELD) of the committed generators and by optimizing the reactive power flow (Qev) from EV to grid. Implementation of this algorithm leads to an improvement in the voltage profile and decrease in the losses in the system. The proposed algorithm gives optimal values of reactive power that must flow from EV to grid and it also gives optimal real power generation of the committed generators. System studies have been performed at different penetration levels and the results have been compared. At higher penetration levels the improvement in the grid parameters has been found to be more significant. © 2016 IEEE.