This paper presents the design of DSTATCOM (Distribution Static Synchronous Compensator) controller. The results are verified by using PSCAD/EMTDC package. The state equation derived by decomposition analysis of DSTATCOM current component is applied to load model and the combined model which considered constraint condition. In case of single line to ground fault, the conventional method of Pl control is compared with LQR control technique. LQR control is shown to be superior in terms of response profile and composition of voltage sag.