Abstract—Losses reduction initiatives in distribution systems have been activated due to the increasing cost of supplying electricity, the shortage in fuel with ever-increasing cost to produce more power, and the global warming concerns. These initiatives have been introduced to the utilities in shape of incentives and penalties. Recently, the electricity distribution companies in Oman have been incentivized to reduce the distribution technical and non-technical losses with an equal annual reduction rate for 6 years. In this paper, different techniques for losses reduction in Mazoon Electricity Company (MZEC) are addressed. In this company, high numbers of substation and feeders were found to be non-compliant with the Distribution System Security Standard (DSSS). Therefore, 33 projects have been suggested to bring non-complying 29 substations and 28 feeders to meet the planed criteria and to comply with the DSSS. The largest part of MZEC’s network (South Batinah region) was modeled by ETAP software package. The model has been extended to implement the proposed projects and to examine their effects on losses reduction. Simulation results have shown that the implementation of these projects leads to a significant improvement in voltage profile, and reduction in the active and the reactive power losses. Finally, the economical analysis has revealed that the implementation of the proposed projects in MZEC leads to an annual saving of about US$ 5 million. Keywords—Losses Reduction, Technical Losses, Non-Technical Losses, Cost Analysis I. INTRODUCTION FTER deregulation of the electrical power industry, the distribution business has remained as a regulated monopoly. Because of the deregulation process, distribution utilities are currently facing increased pressures from shareholders and regulatory authorities to improve investment and operational efficiency [1]. The delivery of power from sources to the consumer points is always accompanied with power losses. Power losses occur in distribution networks due to Joule’s effect which can account for as much as 13% of the generated energy [1, 2]. Such non-negligible amount of losses has a direct impact on the financial issues and the overall efficiency of distribution utilities. Therefore, methods for losses reductions, that optimally allocate scarce financial resources and maximize firm value, are essential for achieving the financial goals of distribution companies [1]. Y. Al-Mahroqi is with Mazoon Electricity Company, Muscat, Oman (phone: 00968-24557455, fax: 00968-24557474; e-mail: yousuf.almahroqi@mzec.co.om). I.A. Metwally, A. Al-Hinai and A. Al-Badi are with Department of Electrical & Computer Engineering, College of Engineering, Sultan Qaboos University P.O. 33, Al-Khod, Muscat-123, Sultanate of Oman, (phone: 00968-24142532, fax: 00968- 24413454; e-mails: metwally@squ.edu.om, hinai@squ.edu.om, albadi@squ.edu.om). Distribution power losses can be divided into two categories technical and non-technical losses [2]. The technical losses area related to the material properties and its resistance to the flow of the electrical current that is dissipated as heat. The most obvious examples are the power dissipated in distribution lines and transformers due to their internal electrical resistance. In addition, technical losses are easy to be simulated and calculated [2]. On the other hand, non-technical losses are caused by clandestine connections, frauds in energy meters, diversity of readings and deficiencies (or losses) in the processes of energy measurement [3]. High rate of technical and non-technical losses might cause [1, 3]: • Poor quality of service offered to customers. • High cost due to useless or premature investments. • Reduction in revenue resulting in cash difficulties with all ensuing economic consequences. Major losses drive the authorities to subsidize the company, thus increasing the states’ financial load. Reducing the losses and reaching an acceptable level will restore the confidence of lenders and private investors to encourage them to participate financially in the development of the power sector. The resulted gains from losses reduction can be classified into economic and financial gains, and institutional benefits [4]. Therefore, the reduction of technical losses leads to a real gain in energy and reduced capital-intensive investments. On the other hand, the reduction of non-technical losses not only improves the financial balance of the company concerned, but also the load curve by subjecting consumption to the tariff regulation [4]. In this paper, different techniques for technical and non- technical losses reduction in MZEC are addressed. Non- complying substations and feeders with the DSSS in the largest part of MZEC’s network (South Batinah region) was modeled by ETAP software package with and without 33 proposed projects, where 14 projects were for upgrading existing substations or feeders, and 17 were for constructing new ones, while only 2 were aimed to shift loads among substations. In addition, the model was extended to implement the proposed projects, to examine their effects on losses reduction, and to conduct an economical analysis. These projects were proposed to comply with the current planning criteria called DSSS. The number of these projects was based on the substations which are not currently meeting the DSSS while the distribution of them on 14:17:2 is based on their load forecasting for the coming three years as it can be found in the company’s “Distribution System Capability Statement”. Y. Al-Mahroqi, I.A. Metwally, A. Al-Hinai, and A. Al-Badi Reduction of Power Losses in Distribution Systems A World Academy of Science, Engineering and Technology 63 2012 585