The work reported in this paper adds damping to the inter-area mode of oscillation in a power system with relatively high penetration of wind power, by modulating active power output of the permanent magnet synchronous generator wind turbines (PMSG-WTs) using local information. The dc-link voltage of the voltage source converter is used as a local signal for controller input. This input signal is processed through phase compensator blocks, and the output of the controller is used to vary the active power reference signal of the machine side converter controller. The results are compared to the cases of the same supplementary controller loop with a global signal as its input, added to the both PMSG-WTs and doubly fed induction generator wind turbines. An optimization-based approach is proposed to adjust and coordinate various control loops of the grid-connected PMSG-WTs. The performance of the supplementary damping control loop is evaluated, employing modal analysis and time domain simulations of a power system test case.