In this paper investigations are carried out to explore the generalization of the adverse impact of the existing setting of the generator distance phase backup protection (Relay (21)) according to the existing standards on generator overexcitation thermal capability during system disturbances. These investigations are conducted in two stages; the first includes a SMIB system incorporating a midpoint STATCOM in order to increasing its power transfer capability. The second includes a multi-generator power plant configuration. Both stages have included the performance of Relay (21), during two common system disturbances, namely a system fault and a sudden application of a large system load while the generator overexcitation limiter (OEL) is in service. The results of this paper have generalized the restricting impact of the current setting of Relay (21) on the overexcitation thermal capability of the generator during system disturbances. Moreover, results also have proven that in-depth stability studies are of high paramount for selecting Relay (21) setting which will allow the generator to fulfill adequate level of voltage stability during system disturbances.Index Terms-Generator distance phase backup protection, Generator overexcitation thermal capability, generator overexcitation limiters (OEL), generator steady-state capability limit, , static synchronous compensator (STATCOM).