IEEE TRANSACTIONS ON POWER SYSTEMS
The Loss That is Unknown is No Loss At All:
A Top-Down/Bottom-Up Approach for
Estimating Distribution Losses
Carlos A. Dortolina, Senior Member, IEEE, and Ramn Nadira
AbstractThe accurate evaluation of losses in power systems has
important technical, economic, and regulatory repercussions. For
example, losses are increasingly becoming one of the most impor-
tant measures of system performance, especially in connection with
private sector participation (PSP) in the distribution segment of
the industry. This paper proposes a top-down/bottom-up approach
for accurately estimating technical losses in power distribution sys-
tems when a complete set of modeling data is not available. The
results of the recent application of this approach in a developing
country are also presented.
Index TermsLosses, power distribution economics, power dis-
tribution planning.
I. INTRODUCTION
T OTAL SYSTEM losses are tell-tale measures of how ef-
ficiently a power system is delivering energy to its cus-
tomers. Losses do not generate revenues for the utilities and are
often one of the controlling factors when evaluating alternative
planning and operating strategies.
Total system losses are the difference between the energy pur-
chased (or produced) and the energy delivered (or sold) to end
users. Losses can come from two sources: 1) technical losses,
those that result from the heating of conductors and coils and
from the excitation of the windings of transformers and other
devices, and 2) nontechnical losses, those associated with inad-
equate or missing revenue metering, with problems with billing
and/or collection systems, and/or with consumer pilferage.
There are two sources of technical losses: a) the load losses,
consisting of the and losses in the series impedances
of the various system elements (e.g., lines and transformers);
when the system is unloaded (i.e., ), the load losses are
obviously nonexistent and b) the no-load losses, which are in-
dependent of the actual load served by the system. The majority
of the no-load losses are due to the transformer core losses re-
sulting from the excitation current [1], [2].
There are both capacity (or demand) losses and energy losses.
Capacity losses contribute to the system peak load demand,
while energy losses increase the megawatthour requirements of
the system load. Both capacity and energy losses can be subdi-
vided into their active and reactive elements.
Manuscript received April 9, 2004; revised September 26, 2004. Paper no.
TPWRS-00202-2004.
C. A. Dortolina is with Stone & Webster Management Consultants, Houston,
TX 77077 USA (e-mail: carlos.dortolina@shawgrp.com).
R. Nadira is with TRC Management Solutions, Houston, TX 77042 USA
(e-mail: madira@trcsolutions.com).
Digital Object Identifier 10.1109/TPWRS.2005.846104
0885-8950/$20.00 2005 IEEE
1
Reducing total system losses in distribution systems is often a
key motivation for the incorporation of the private sector in such
systems in many countries around the world. This is so since it
is not uncommon for total system loss ratios in these countries
to be very high, oftentimes exceeding 30%or even 40%of
purchases (see Section VII). This is compounded by the fact that
such utilities often have a hard time collecting what they bill. In
some cases, utilities are only able to collect about 50%60% of
billings, making their effective losses (defined as the percentage
of purchases that are not actually translated into real cash flow)
rather high.
Even though total system losses are straightforward to cal-
culate, their breakdown into technical and nontechnical com-
ponents is not generally known. Few utilities in the developing
world have anything resembling an accurate estimate of such
a breakdown. Given that high loss ratios are generally due to
nontechnical losses, it is rather important to be able to estimate
these losses accurately. The obvious way to do thatgiven that
total system losses are straightforward to calculateis to calcu-
late/estimate technical losses by means of simulations and then
to estimate the nontechnical losses as the difference between the
total system losses and the technical losses. The problem is that
often, complete data required to estimate the technical losses
are not available. This paper presents a top-down/bottom-up ap-
proach for calculating technical losses in distribution systems
when a complete set of modeling data is not available.
II. BACKGROUND
Traditionally, electric utilities have considered technical
losses in a broad and general manner. Often, data are compiled
by allocating a set percentage of total system losses to each
of the system components (e.g., transmission, step-up and
step-down transformers, distribution, and others). For example,
it is typical to assume that 3%4% of the total electrical energy
produced is lost in the bulk transmission system.
However, the importance of accurately understanding and de-
termining system losses has been emphasized in the past few
years for many reasons, including the following.
1) The current emphasis on output-based rather than input-
based regulation, such as performance-based ratemaking
(PBR).
2) Losses are increasingly becoming one of the most impor-
tant measures of system performance, especially in con-
nection with the participation of the private sector. For ex-
ample, in the recent privatization of the distribution utility
2 IEEE TRANSACTIONS ON POWER SYSTEMS
in New Delhi, India, private companies bid on the basis of
a trajectory of loss improvements for the first five years of
operation [3].
3) Transactions in electricity markets need to take into ac-
count the impact and cost of system losses in an accurate
way.
Capacity losses ( ) in an electric power system are a func-
tion of the network topology ( ) and the voltage magnitude and
angles ( and , respectively) at system buses; that is
(1)
where is a nonlinear function. The above expression is useful
in calculating capacity losses only when the operating condi-
tions (in terms of , , and ) are completely known. The op-
erating conditions can be estimated via load flow simulations.
On the other hand, energy losses ( ) can be computed as
(2)
where represents the time-varying power losses, and is
the time period of interest. Thus, a prerequisite for computing
is to determine . However, computing for
is impracticalor even impossibleespecially for
long periods of time and/or for large-scale systems, since in
those cases, many of the operating conditions occurring within
are not known beforehand.
Due to these practical difficulties, the energy loss evaluation
methods proposed are generally approximate. One such method
is the loss factor versus load factor model, which computes
as
Average Losses for Period (3)
and the average losses are computed from the peak losses and
the loss factor. The latter are typically determined from empir-
ical equations, called the loss versus load relationships, which
relate the loss factors to the load factors.
The next sections focus on our proposed approach and
methodology for estimating distribution losses.
III. SOLUTION APPROACH
Total system losses may be disaggregated into transmission
and distribution losses as follows:
Total Losses (4)
where and are the technical and nontechnical trans-
mission losses, respectively, and and are technical
and nontechnical distribution losses, respectively. Equation
(4) assumes that generation injections are netrather than
grossquantities. Otherwise, that equation can be modified in
the obvious manner.
Nontechnical losses in transmission systems are often asso-
ciated with inaccuracies with the metering system at the points
where electricity is purchased or sold at a wholesale level (rather
than with theft). Thus, for all practical purposes, nontechnical
transmission losses are negligible, and as a result, (4) can be
simplified as follows:
Total Losses (5)
Accurate estimates of technical losses in transmission sys-
tems are generally on hand, given that both data and software
tools are typically available.
A. Technical Losses in Distribution Systems ( )
We assume that technical losses in distribution systems are
contributed by the high voltage (HV) to medium voltage (MV)
substation transformers as well as by the MV distribution cir-
cuits, the MV to low voltage (LV) transformers, the LV circuits,
the customer service drops, and the end-user meters.
Technical losses were estimated using the well-known
PSS/ADEPT simulation program, which is an integrated in-
teractive proprietary software of Power Technologies, Inc.,
Schenectady, NY. These included the load losses in the HV to
MV substation transformers as well as the losses contributed by
the MV distribution circuits and the load losses of the MV to LV
transformers. Loss ratios in the LV circuits, customer service
drops, and end-user meters were estimated as approximately
2.3%.
PSS/ADEPT can be used to simulate, analyze, and optimize
the performance of distribution systems. The program can
model balanced or unbalanced and looped or radial systems,
with any combination of three-phase, two-phase, or single
laterals.
Transformer core (no-load) losses were estimated from 1) the
number of transformers for each region of the system; 2) the
average transformer kilovoltampere capacity, calculated from
available information; and 3) the magnitude of core losses in
typical transformers, as reported in the literature (see [4]).
B. Nontechnical Losses in Distribution Systems (DLNT)
In distribution systems, the sources of nontechnical losses are
deficiencies in the commercial cycle, including unread or
improperly read meters and/or inaccurate logging of read-
ings;
nonmetered supply, due to a lack of meters (in these cases,
consumption is often estimated);
inaccurate meters;
meter tampering and meter bypass;
illegal connections (theft), i.e., energy diverted by illegal
taps in the network.
Nontechnical losses in distribution systems generally occur
in the LV network, although sometimes, they are also origi-
nated in the MV system. In this last case, nontechnical losses
are normally associated with meter inaccuracy or meter tam-
peringor, more properly, with tampering with the measure-
ment transformers, especially the current transformers (CTs).
Once total distribution losses ( ) and the technical distribu-
tion losses ( ) are known, nontechnical losses ( ) are
easy to compute, as follows:
(6)
DORTOLINA AND NADIRA: THE LOSS THAT IS UNKNOWN IS NO LOSS AT ALL
Fig. 1. Approaches for estimating distribution losses.
IV. METHODOLOGY
Approaches for estimating the technical losses in a distribu-
tion system can be broadly classified into the following two cat-
egories: 1) top down and 2) bottom up (as illustrated in Fig. 1).
The results yielded by the top-down and bottom-up ap-
proaches must be in agreement with each other. Otherwise,
additional analysis needs to be conducted in order to reconcile
the differences. Typically, differences at or below 10% can be
considered acceptable.
The top-down and bottom-up approaches are discussed next.
A. Top Down
Top-down approaches can be described as classification and
interpolation methods and generally consist of the following
three steps.
Step 1: Feature Extraction: This step involves the definition
and valuation of explanatory variables, i.e., variables that con-
tain enough information to be able to explain a certain dimen-
sion of the performance of the distribution system (see Fig. 1).
For example, the kilowatthour per customer and/or the number
of customers per length of feeder of a distribution system are
explanatory variables for the distribution technical losses; that
is, the higher the kilowatthour per customer and/or the higher
the number of customers per length of feeder, the smaller the
loss ratio should be.
Step 2: Clustering Analysis: This step involves the determi-
nation of closeness of the specific distribution system under
consideration to other distribution systems whose characteris-
tics are known with certainty. Closeness is generally measured
in terms of the explanatory variables.
Step 3: Estimation of Losses: This step assumes that similar
distribution systems will have comparable technical losses (on
a percentage basis). As such, technical losses of the distribution
system under consideration are estimated from those of the sys-
tems close to it (i.e., in the same cluster.)
The top-down approaches are often referred to as bench-
marking. It is well known that these approaches need to be ap-
plied with care since
3
Fig. 2. Number of customers per kilometer of feeder versus technical loss
ratios.
1) no two systems are exactly the same, and therefore, there
is no guarantee that the clustering analysis will always be
valid;
2) benchmarking analysis tends to be broad rather than spe-
cific. For example, it is difficult to correlate a specific in-
vestment and/or expenditure with a specific system per-
formance.
The above notwithstanding, top-down analysis tends to yield
quick estimates that carry a relatively large degree of uncer-
tainty. As such, these estimates need to be further verified before
they can be put to practical use.
By way of example of a top-down approach, Fig. 2 shows the
relationship between the number of customers per kilometer of
feederthe explanatory variableand the technical loss ratios
(in percent) of an electricity distribution system. In this case,
applying the top-down approach is rather simple, as it only in-
volves a univariate functional evaluation. In this example, those
systems with about 100 customers per kilometer of feeder are
expected to have a loss ratio of about 8.5%. On the other hand,
those with 200 and with 50 customers per kilometer are ex-
pected to have loss ratios of 7% and 9.5%, respectively. Note
that Fig. 2 can also be used to perform the complementary anal-
ysis, i.e., estimating the likely level of customers per kilometer
of feeder for a certain level of technical loss ratio.
4 IEEE TRANSACTIONS ON POWER SYSTEMS
Fig. 3. Kilowatthours per customer versus technical loss ratios.
Fig. 3, on the other hand, shows another type of relationship,
this time between kilowatthours per customer (the explanatory
variable) and the technical loss ratios.
In cases where there is more than one explanatory variable,
the estimation functions will be multivariable rather than uni-
variate. In addition, when the space of possibilities is polar-
ized, clustering analysis needs to be performed, and estimation
functions need to be determined for each cluster. In classical
benchmarking analysis for electric utilities, however, it is very
common to use univariate estimation functions.
B. Bottom Up
In bottom-up approaches, analysis is conducted to determine
what specific actions (e.g., building new circuits) would be re-
quired to bring the performance of the distribution company to
a given (predetermined) level. In its purest form, bottom up en-
tails a complete and detailed system planning. Needless to say,
bottom-up analysis requires much more data and is more time
consuming that its top-down counterpart.
In bottom-up analysis, losses can be computed with relative
accuracy using specialized software, assuming that the exten-
sive set of required data is available. If not, a virtual system is
used (see Fig. 1). This entails the calculation of the losses that
an efficient model system (i.e., the virtual system) would
incur when providing electricity service to the load of the spe-
cific distribution system under consideration.
C. Hybrid Approach
This approach assumes that sufficient data are available for
certain portions (or regions) of the system and are not available
for the rest. In order to obtain an accurate assessment of the
existing technical losses in a system with such incomplete data,
losses may be computed for those regions where a complete set
of information is available. Then, technical losses for the rest
of the regions can be estimated by means of clustering tech-
niques. This is a combination of the top-down and bottom-up
approaches described above. The advantage of the hybrid
approach is that it is relatively less time consuming than the
bottom-up approach and more accurate than the top-down
approach. The disadvantage is that it requires more detailed
information than top-down methods while yielding results that
may not be as accurate as those of a bottom-up approach.
V. CASE STUDY
This utility serves nearly 500 000 customers, in a South-
eastern African country with an electrification level of slightly
above 8% and with a per capita consumption around 55 kWh
per inhabitant per year. As such, the potential for development
of the electricity industry in this country is significant. The
historical peak load has been reported at around 500 MW. Load
demand generally reaches its maximum level between October
and December of every year. The load shape is characteristic of
a system with a dominant residential load. That is, load demand
increases significantly (i.e., by a factor of almost two) between
5:00 p.m. and 7:00 p.m. This imposes a rigorous requirement
on the system [5].
Energy lossesand their associated costs [6]appear to be
a major problem for this utility. Current loss ratios, including
technical and nontechnical losses, appear to be in excess of 28%
of the total generated energy.
Several interesting methodologies have been developed to
compute transmission [7][9] as well as distribution losses [10],
[11]. The load-flow algorithm used is that from PSS/ADEPT, as
described in Section III.
We present below the results of applying the hybrid approach
described earlier to calculating technical system losses in this
developing country in Southeastern Africa. We operate under
the same premises indicated above, i.e., sufficient data are avail-
able for certain portions (or zones) of the system but not for the
rest.
First, we employ a top-down method and assume that inten-
sity of consumption (in terms of kilowatthours per customer per
year) and customer density (in terms of number of customers
per kilometer of primary feeder) are explanatory variables with
respect to technical system losses. Then, by means of clustering
techniques, we identify those regions that are close to each
other in terms of these explanatory variables.
In this example, it turned out that four clusters were sufficient
to divide the space of 22 regions into coherent groups (or zones).
This is illustrated in Fig. 4. The primary distribution voltages in
this system are 11 and 33 kV.
Next, the approach involves selecting typical or represen-
tative 11 and 33 kV feeders for each zone. Needless to say,
sufficient data for these representative feeders must be avail-
able (including the amount and distribution of the load along the
length of the feeder as well as parameters such as the length and
size of the conductors and the impedance of the MV/LV distri-
bution transformers.) Using a bottom-up approach, we then pro-
ceeded to calculate (via load-flow simulations) loss functions
for the representative feeders. Loss functions parameterize tech-
nical (capacity) losses as a function of the load they carry, both
of which are expressed as a percentage of installed capacity.
Loss functions for selected representative feeders in this ap-
plication example are shown in Fig. 5 [12]. Observe that the loss
functions exhibit the expected quadratic shape. These loss func-
tions were then used to estimate the technical losses of all the
other feeders in the same zone for which data were not available.
It is clear that the accuracy of the estimation is a function of sev-
eral parameters, including feeder utilization factor (i.e., the ratio
DORTOLINA AND NADIRA: THE LOSS THAT IS UNKNOWN IS NO LOSS AT ALL 5

Fig. 4. Four clusters (or zones) are sufficient to divide the space of regions.

TABLE I
ESTIMATE OF TECHNICAL LOSS RATIOS (TOP-DOWN APPROACH)

TABLE II
ESTIMATE OF TECHNICAL LOSS RATIOS (HYBRID APPROACH)

Fig. 5. Loss functions of typical feeders.

meter of primary feeder and an intensity of consumption of ap-
proximately 3170 kWh/customer/year. Using these values for
of peak load to installed capacity), feeder topology, and load dis-
the explanatory variables, we estimate from Figs. 2 and 3 that
tribution.
technical loss ratios for this system are in the 9%10% range.
For the above, an additional assumption was adopted as
On the other hand, Table II summarizes the results yielded by
needed: that the utilization factor for all feeders in the same
the hybrid approach. As discussed earlier, a bottom-up (plan-
region was approximately the same. This is based on the fact
ning) approach could not be used in this case, since sufficient
that one would expect that similar design criteria would be
data were not available. Table II shows that the hybrid approach
applied for all substations and feeders within the same region.
estimates technical loss ratios at 9.9%. This value is in agree-
Clearly, this assumption is not needed if the corresponding data
ment with that yielded by the top-down approach.
are available.
Finally, given that the total loss ratio for this system was about
Energy losses were estimated using the load shapes for each
26.3%, (6) estimates nontechnical losses at 16.4%.
of the feeders and the loss functions shown in Fig. 5.
VII. OTHER CONSIDERATIONS
VI. RESULTS
This section presents data that are useful when performing
Table I shows the results from the application of a top-down top-down analysis. For example, Fig. 6 presents actual loss ra-
approach for the estimation of the technical losses for our test tios for a number of selected distribution companies in devel-
case. This system happens to have about 28 customers per kilo- oping countries. The majority of this information was gathered
6 IEEE TRANSACTIONS ON POWER SYSTEMS
Fig. 6. Distribution loss ratios in selected distribution companies around the world.
Fig. 7. Loss ratios have decreased after privatization.
through our direct involvement with these distribution compa-
nies (in most of the cases, the particular company wished to re-
main anonymous).
Fig. 6 shows that in developing countries (see Developing
Countries in the figure), loss ratios exhibit a large degree of
volatility, as their values can be anywhere between 5% and 38%,
with the lower end of the range corresponding to companies that
have benefited from the incorporation of private sector opera-
tors. Fig. 6 also shows that in contrast, loss ratios in developed
countries (see BenchmarkUSA in the figure) are expected
to be in a relatively narrow range (i.e., 6%8%). This can be seen
in the figure for the first two cases, presented in bars divided in
two colors (the division of the bar represents the average value).
Further, experience shows that total system losses are rapidly
reduced after privatization. In particular, private companies are
very adept at reducing nontechnical losses by introducing ad-
vances in the commercialization system (e.g., replacing/recali-
brating/installing meters and implementing advanced customer
metering and billing systems).
The above is clearly illustrated in Fig. 7 for five distribution
companies in Latin America [13]. The figure shows the dramatic
reduction in total system losses, particularly during the initial
years following privatization. Note that in all cases, within eight
years after privatization, total system losses have been reduced
from relatively high levels to values from the single digits to the
low teens. This is most impressive.
VIII. CONCLUSIONS
Accurately estimating losses in distribution systems is be-
coming increasingly important, as regulatory thinking shifts
from input-based to output-based methods and as private com-
panies become more involved in the distribution segment of
the electricity industry. This need is particularly important in
developing countries, where total losses are generally high,
especially prior to the incorporation of the private sector.
The problem is that it is precisely in these situations where
needed data for accurately estimating the total lossesand
particularly their breakdown into technical and nontechnical
componentsare generally lacking.
We have presented a top-down/bottom-up approach for ac-
curately estimating technical system losses in electricity distri-
bution systems. The main feature of the approach is that it can
handle varying degrees of data availability.
We have also presented the results of the application of the
approach to the estimation of technical and nontechnical system
losses in a developing country, where a complete set of required
data was not available.
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7
Carlos A. Dortolina (SM01) received the M.S.
degree in electric power engineering in 1995 from
Rensselaer Polytechnic Institute, Troy, NY, and the
M.B.A. degree in economics in 1999 from Andres
Bello Catholic University, Caracas, Venezuela.
He is a Senior Consultant/Manager with Stone &
Webster Management Consultants, Inc., Houston,
TX. He has specific international expertise pro-
viding regulatory, privatization, and/or restructuring
support for electricity markets as well as with the
independent evaluation and review of electricity
transmission and distribution (T&D) companies.
Ramn Nadira received the M.S. degree in electrical
engineering and applied physics in 1983 and the
Ph.D. degree in systems engineering in 1989, both
from Case Western Reserve University, Cleveland,
OH.
He is a Vice President with TRC Management So-
lutions, Houston, TX. For over 24 years, he has pro-
vided technical consulting services to electric utili-
ties, independent project developers, and the finan-
cial community in domestic as well as international
assignments in the electric power sector.