In gas turbine combined heat and power systems, steam injection is a good way to cope with seasonal variations in electricity and heat demands. However, even though thermal energy demand decreases considerably in cooling seasons, the surplus exhaust heat cannot be fully utilized for steam injection in conventional operation because of a reduction in compressor surge margin. This study suggests a modified operation to increase power output without damaging the minimum allowable surge margin. This can be realized by extracting some of the compressor discharge air and supplying it to the turbine exhaust side. This paper shows that the modified operation allows for more steam to be injected in comparison to conventional steam-injected operation while maintaining the same compressor surge margin. The modified operation provides another merit of modulating the heat-to-power-generation ratio by controlling both the amount of air bypass and the steam injection rate. In particular, pure power generating operation, where generated steam is fully injected such that no heat output is available, is possible without decreasing the surge margin below a desired minimum value. The impact of the air bypass is demonstrated for a sample ambient temperature condition and the trend with ambient temperature variation is also illustrated. (C) 2014 Elsevier Ltd. All rights reserved.