A new method based on statistical simulation for production costing, reliability evaluation and transmission expansion planning of electric power systems is developed. This method considers apparatus outage probabilities and load forecast uncertainties. Random numbers are generated, according to appropriate laws, to simulate the state of the apparatus and the demand of the bus loads. Through successive applications of the minimum cost-maximum flow algorithm, it is capable of handling the economic dispatch problem embodied in the procedures. An expansion algorithm is introduced, which selects the element with the highest full load ratio ( FLR) for capacity addition. This method generates, as a byproduct, the expected power flow pattern which is valuable for power system planner. Application of the method is demonstrated using the IEEE five-bus test system.