Expansion of power systems is accompanied by innovations in smart grid solutions to power system operation and control. Profit enhancement by power oscillation damping controllers (PODC) and acceleration based power system stabilizer (PSS), model PSS2B, designed by the idea of pseudo-spectra based on multi-objective optimization is presented. The contribution of multi-objective functions in respect of performance and robustness criteria in stability enhancement is evaluated by considering the control actions of PODC and PSS2B as an ancillary service (AS). The robustness requirement is achieved by using the idea of pseudo-spectra to handle the changes of power system parameters and time delay introduced by processing of remote signals in the wide-area supplementary damping controller (WASDC). The weighted sum of six objective functions as performance and robustness criteria is selected as low-frequency oscillation damping index (LFODI). Two scenarios for the evaluation of small signal stability as an AS provided by PODC and PSS2B are considered. A multi-objective optimization approach based on LFODI, generation costs is formulated and improved non-dominated sorting genetic algorithm-II (INSGA-II) is employed to solve this problem. Fuzzy decision making (FDM) is used to find the best compromise solution from the set of Pareto-solution obtained by INSGA-II. Comparative analysis of the results of the conventional method and the proposed design method is presented by case study on a modified 2-area 4-machine power system. (C) 2014 Elsevier Ltd. All rights reserved.