<p>Congestion is an important issue and its management is one of the main technical challenges in any restructured power system. Congestion occurs, when the line flow exceeds its capacity while accommodating all the constraints of power transfer through the line simultaneously. The Locational Marginal Price (LMP) is a vital element involved in the calculation of generation units’ profit. In this proposal, LMP based bi-level approach for congestion management has been developed and it can be reliably and efficiently used for the relief of congestion in restructured power systems. The difference in LMP across a line is utilized to categorize various congestion zones while the optimal placement of distributed generation in the most congestion sensitive zone is done with the use of Monarch Butterfly Optimization for congestion management. The improved power flow and decline in congestion cost imply the techno-economic efficacy of the proposed approach. Optimal power flow solution is obtained via linear programming. The standard IEEE 30-bus and 118-bus systems with both supply and demand bidding are used in the illustration and testing of proposed methodology.</p>