To ensure Ethiopian transmission system is planned and operated safely, economically and reliably, steady state contingency analysis must be performed. Contingency analysis is an energy management system to give the operators and planners an indication of what might happen to the power system in the event of an unplanned (or unscheduled) equipment outage. In the event of contingency, the most serious threat to operation and control of power system is insecurity. Therefore, the contingency analysis is a key for the power system security. Presently the Ethiopian power network is suffering partial and full blackouts because of generation units, transmission lines and transformers outage. The number of black outs which were registered in 2017 because of 230kV and 400kV transmission lines are six. However, contingency analysis is not being performed for Ethiopian power networks and consequently the power system operators don’t have action plan for various contingencies that may occur in the system. The main aim of this work is to carry out the contingency selection, ranking and analysis of Ethiopian power network by considering the two kinds of performance indices; active power performance index (PIP) and reactive power (voltage) performance index (PIV) for transmission line outages. In this thesis Newton Raphson (NR) power flow method is implemented for contingency analysis of 230kV and 400kV transmission lines using Siemens PTI software Power System Simulator for Engineering (PSS/E). As per the over all performance index (PI) result Bedele-Agaro 230kV and G.Gibe II-G.Gibe old 400kV lines have highest PI values with 43.4 and 42.2 respectively.For these two lines rehabiltation method is disscused and changing the existing single circuit transmission lines to double circuit makes the South western part of Ethiopia power network to be secure.