The control mode and control parameters of excitation system exert larger influence on generator and power system safe and steady operation. Some power outage in the power grid of industrial enterprises revealed the excitation system stability problem in captive power plants. A Heffron-Philips extended model considering constant reactive power and constant power factor excitation control mode is established and system state matrix is formed. The main factors affecting excitation system stability are studied by eigenvalue analysis. A method for exciter parameters optimization is proposed based on system root locus. The abnormal oscillation phenomenon of captive generator in actual industrial enterprises power grid is analyzed and the exciter parameters is redesigned. The analysis and design approaches are verified by simulation results.