The optimal tap selection of transformers directly connected to generators is one of the two significant industry problems. The generator step up and auxiliary transformers generally are equipped with no-load (fixed) taps that are infrequently changed. Their optimum positions need to be determined for meeting power system discrete states over long periods, covering the annual light-load, peak-load and emergency conditions. The other and related problem is the use of design reactive capability of generators rather than their actual operating limits. This paper reports on application of a modified barrier-augmented Lagrangian (MBAL)-based nonlinear optimal power flow method for the optimum selections of the transformer tap positions and the voltage set points of the generators within their over- and under-excitation operating limits. The feasibility of method is demonstrated using a 160-bus test system in operation at a mid-Atlantic utility. It is shown that the method minimizes the deviations of the system bus voltages from the unity while meeting the power system equality and inequality constraints under light- and peak-load conditions.