Congestion management comprising congestion relief and congestion cost allocation is one of the important operational tasks to be carried out in deregulated power system. Very few methods reported in literature address the combined problem of congestion relief and cost allocation. Congestion relief is obtained using optimal injection corrections from willing participants (both GENCO`s and DISCO`s) for a price and adjustments of the control settings of the UPFCs (cost free ) located in the transmission lines. The solution approach proposed takes care of the enforcement of the operating limits of the control parameters of UPFC. Congestion usage charges for using the congested lines are allocated equitably to the transactions causing congestion. This study addresses the impact of UPFCs on congestion relief and allocation of congestion charges to dominant transactions in a combined pool and bilateral market using DC-load flow model. Linear Programming optimization technique is used to solve this congestion management problem. The results obtained for IEEE 24 bus Reliability Test System demonstrate the impact of cost free action of UPFCs on congestion relief and equitable allocation of charges.