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An observer design of a hybrid system approach to a single machine infinite bus system with a static var compensator (SMIB-SVC) is proposed. The observer includes a location observer determining the current discrete state of the SVC and a continuous observer associating with the current discrete state in producing an estimate of the continuous state evolution of the SMIB-SVC. The outputs of the observer are fed into a least restrictive controller (LRC) and a supplementary controller where the LRC ensures the system stays in a safety set and the supplementary controller improves damping of the system. The simulation results show the convergence of the continuous states and the identifiability of the current discrete state in a finite number of steps.