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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 Reducing total system losses in distribution systems is often a
important technical, economic, and regulatory repercussions. For key motivation for the incorporation of the private sector in such
example, losses are increasingly becoming one of the most impor- systems in many countries around the world. This is so since it
tant measures of system performance, especially in connection with
private sector participation (PSP) in the distribution segment of is not uncommon for total system loss ratios in these countries
the industry. This paper proposes a top-down/bottom-up approach to be very high, oftentimes exceeding 30%or even 40%of
for accurately estimating technical losses in power distribution sys- purchases (see Section VII). This is compounded by the fact that
tems when a complete set of modeling data is not available. The such utilities often have a hard time collecting what they bill. In
results of the recent application of this approach in a developing some cases, utilities are only able to collect about 50%60% of
country are also presented.
billings, making their effective losses (defined as the percentage
Index TermsLosses, power distribution economics, power dis- of purchases that are not actually translated into real cash flow)
tribution planning.
rather high.
Even though total system losses are straightforward to cal-
I. INTRODUCTION culate, their breakdown into technical and nontechnical com-
ponents is not generally known. Few utilities in the developing
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
world have anything resembling an accurate estimate of such
a breakdown. Given that high loss ratios are generally due to
often one of the controlling factors when evaluating alternative nontechnical losses, it is rather important to be able to estimate
planning and operating strategies. these losses accurately. The obvious way to do thatgiven that
Total system losses are the difference between the energy pur- total system losses are straightforward to calculateis to calcu-
chased (or produced) and the energy delivered (or sold) to end late/estimate technical losses by means of simulations and then
users. Losses can come from two sources: 1) technical losses, to estimate the nontechnical losses as the difference between the
those that result from the heating of conductors and coils and total system losses and the technical losses. The problem is that
from the excitation of the windings of transformers and other often, complete data required to estimate the technical losses
devices, and 2) nontechnical losses, those associated with inad- are not available. This paper presents a top-down/bottom-up ap-
equate or missing revenue metering, with problems with billing proach for calculating technical losses in distribution systems
and/or collection systems, and/or with consumer pilferage. when a complete set of modeling data is not available.
There are two sources of technical losses: a) the load losses,
consisting of the and losses in the series impedances II. BACKGROUND
of the various system elements (e.g., lines and transformers);
Traditionally, electric utilities have considered technical
when the system is unloaded (i.e., ), the load losses are
losses in a broad and general manner. Often, data are compiled
obviously nonexistent and b) the no-load losses, which are in-
by allocating a set percentage of total system losses to each
dependent of the actual load served by the system. The majority
of the system components (e.g., transmission, step-up and
of the no-load losses are due to the transformer core losses re-
step-down transformers, distribution, and others). For example,
sulting from the excitation current [1], [2].
it is typical to assume that 3%4% of the total electrical energy
There are both capacity (or demand) losses and energy losses.
produced is lost in the bulk transmission system.
Capacity losses contribute to the system peak load demand,
However, the importance of accurately understanding and de-
while energy losses increase the megawatthour requirements of
termining system losses has been emphasized in the past few
the system load. Both capacity and energy losses can be subdi-
years for many reasons, including the following.
vided into their active and reactive elements.
1) The current emphasis on output-based rather than input-
based regulation, such as performance-based ratemaking
Manuscript received April 9, 2004; revised September 26, 2004. Paper no.
TPWRS-00202-2004. (PBR).
C. A. Dortolina is with Stone & Webster Management Consultants, Houston, 2) Losses are increasingly becoming one of the most impor-
TX 77077 USA (e-mail: tant measures of system performance, especially in con-
R. Nadira is with TRC Management Solutions, Houston, TX 77042 USA
(e-mail: nection with the participation of the private sector. For ex-
Digital Object Identifier 10.1109/TPWRS.2005.846104 ample, in the recent privatization of the distribution utility
0885-8950/$20.00 2005 IEEE

in New Delhi, India, private companies bid on the basis of transmission losses are negligible, and as a result, (4) can be
a trajectory of loss improvements for the first five years of simplified as follows:
operation [3].
3) Transactions in electricity markets need to take into ac- Total Losses (5)
count the impact and cost of system losses in an accurate
way. Accurate estimates of technical losses in transmission sys-
Capacity losses ( ) in an electric power system are a func- tems are generally on hand, given that both data and software
tion of the network topology ( ) and the voltage magnitude and tools are typically available.
angles ( and , respectively) at system buses; that is
A. Technical Losses in Distribution Systems ( )
We assume that technical losses in distribution systems are
where is a nonlinear function. The above expression is useful contributed by the high voltage (HV) to medium voltage (MV)
in calculating capacity losses only when the operating condi- substation transformers as well as by the MV distribution cir-
tions (in terms of , , and ) are completely known. The op- cuits, the MV to low voltage (LV) transformers, the LV circuits,
erating conditions can be estimated via load flow simulations. the customer service drops, and the end-user meters.
On the other hand, energy losses ( ) can be computed as Technical losses were estimated using the well-known
PSS/ADEPT simulation program, which is an integrated in-
teractive proprietary software of Power Technologies, Inc.,
(2) Schenectady, NY. These included the load losses in the HV to
MV substation transformers as well as the losses contributed by
where represents the time-varying power losses, and is the MV distribution circuits and the load losses of the MV to LV
the time period of interest. Thus, a prerequisite for computing transformers. Loss ratios in the LV circuits, customer service
is to determine . However, computing for drops, and end-user meters were estimated as approximately
is impracticalor even impossibleespecially for 2.3%.
long periods of time and/or for large-scale systems, since in PSS/ADEPT can be used to simulate, analyze, and optimize
those cases, many of the operating conditions occurring within the performance of distribution systems. The program can
are not known beforehand. model balanced or unbalanced and looped or radial systems,
Due to these practical difficulties, the energy loss evaluation with any combination of three-phase, two-phase, or single
methods proposed are generally approximate. One such method laterals.
is the loss factor versus load factor model, which computes Transformer core (no-load) losses were estimated from 1) the
as number of transformers for each region of the system; 2) the
average transformer kilovoltampere capacity, calculated from
Average Losses for Period (3) available information; and 3) the magnitude of core losses in
typical transformers, as reported in the literature (see [4]).
and the average losses are computed from the peak losses and
the loss factor. The latter are typically determined from empir- B. Nontechnical Losses in Distribution Systems (DLNT)
ical equations, called the loss versus load relationships, which In distribution systems, the sources of nontechnical losses are
relate the loss factors to the load factors. deficiencies in the commercial cycle, including unread or
The next sections focus on our proposed approach and improperly read meters and/or inaccurate logging of read-
methodology for estimating distribution losses. ings;
nonmetered supply, due to a lack of meters (in these cases,
III. SOLUTION APPROACH consumption is often estimated);
Total system losses may be disaggregated into transmission inaccurate meters;
and distribution losses as follows: meter tampering and meter bypass;
illegal connections (theft), i.e., energy diverted by illegal
Total Losses (4) taps in the network.
Nontechnical losses in distribution systems generally occur
where and are the technical and nontechnical trans- in the LV network, although sometimes, they are also origi-
mission losses, respectively, and and are technical nated in the MV system. In this last case, nontechnical losses
and nontechnical distribution losses, respectively. Equation are normally associated with meter inaccuracy or meter tam-
(4) assumes that generation injections are netrather than peringor, more properly, with tampering with the measure-
grossquantities. Otherwise, that equation can be modified in ment transformers, especially the current transformers (CTs).
the obvious manner. Once total distribution losses ( ) and the technical distribu-
Nontechnical losses in transmission systems are often asso- tion losses ( ) are known, nontechnical losses ( ) are
ciated with inaccuracies with the metering system at the points easy to compute, as follows:
where electricity is purchased or sold at a wholesale level (rather
than with theft). Thus, for all practical purposes, nontechnical (6)

Fig. 1. Approaches for estimating distribution losses.

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.
Fig. 2. Number of customers per kilometer of feeder versus technical loss
A. Top Down ratios.
Top-down approaches can be described as classification and
interpolation methods and generally consist of the following 1) no two systems are exactly the same, and therefore, there
three steps. is no guarantee that the clustering analysis will always be
Step 1: Feature Extraction: This step involves the definition valid;
and valuation of explanatory variables, i.e., variables that con- 2) benchmarking analysis tends to be broad rather than spe-
tain enough information to be able to explain a certain dimen- cific. For example, it is difficult to correlate a specific in-
sion of the performance of the distribution system (see Fig. 1). vestment and/or expenditure with a specific system per-
For example, the kilowatthour per customer and/or the number formance.
of customers per length of feeder of a distribution system are
explanatory variables for the distribution technical losses; that The above notwithstanding, top-down analysis tends to yield
is, the higher the kilowatthour per customer and/or the higher quick estimates that carry a relatively large degree of uncer-
the number of customers per length of feeder, the smaller the tainty. As such, these estimates need to be further verified before
loss ratio should be. they can be put to practical use.
Step 2: Clustering Analysis: This step involves the determi- By way of example of a top-down approach, Fig. 2 shows the
nation of closeness of the specific distribution system under relationship between the number of customers per kilometer of
consideration to other distribution systems whose characteris- feederthe explanatory variableand the technical loss ratios
tics are known with certainty. Closeness is generally measured (in percent) of an electricity distribution system. In this case,
in terms of the explanatory variables. applying the top-down approach is rather simple, as it only in-
Step 3: Estimation of Losses: This step assumes that similar volves a univariate functional evaluation. In this example, those
distribution systems will have comparable technical losses (on systems with about 100 customers per kilometer of feeder are
a percentage basis). As such, technical losses of the distribution expected to have a loss ratio of about 8.5%. On the other hand,
system under consideration are estimated from those of the sys- those with 200 and with 50 customers per kilometer are ex-
tems close to it (i.e., in the same cluster.) pected to have loss ratios of 7% and 9.5%, respectively. Note
The top-down approaches are often referred to as bench- that Fig. 2 can also be used to perform the complementary anal-
marking. It is well known that these approaches need to be ap- ysis, i.e., estimating the likely level of customers per kilometer
plied with care since of feeder for a certain level of technical loss ratio.


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
Fig. 3. Kilowatthours per customer versus technical loss ratios.
5:00 p.m. and 7:00 p.m. This imposes a rigorous requirement
on the system [5].
Fig. 3, on the other hand, shows another type of relationship, Energy lossesand their associated costs [6]appear to be
this time between kilowatthours per customer (the explanatory a major problem for this utility. Current loss ratios, including
variable) and the technical loss ratios. technical and nontechnical losses, appear to be in excess of 28%
In cases where there is more than one explanatory variable, of the total generated energy.
the estimation functions will be multivariable rather than uni- Several interesting methodologies have been developed to
variate. In addition, when the space of possibilities is polar- compute transmission [7][9] as well as distribution losses [10],
ized, clustering analysis needs to be performed, and estimation [11]. The load-flow algorithm used is that from PSS/ADEPT, as
functions need to be determined for each cluster. In classical described in Section III.
benchmarking analysis for electric utilities, however, it is very We present below the results of applying the hybrid approach
common to use univariate estimation functions. described earlier to calculating technical system losses in this
developing country in Southeastern Africa. We operate under
B. Bottom Up the same premises indicated above, i.e., sufficient data are avail-
able for certain portions (or zones) of the system but not for the
In bottom-up approaches, analysis is conducted to determine
what specific actions (e.g., building new circuits) would be re-
First, we employ a top-down method and assume that inten-
quired to bring the performance of the distribution company to
sity of consumption (in terms of kilowatthours per customer per
a given (predetermined) level. In its purest form, bottom up en-
year) and customer density (in terms of number of customers
tails a complete and detailed system planning. Needless to say,
per kilometer of primary feeder) are explanatory variables with
bottom-up analysis requires much more data and is more time
respect to technical system losses. Then, by means of clustering
consuming that its top-down counterpart.
techniques, we identify those regions that are close to each
In bottom-up analysis, losses can be computed with relative
other in terms of these explanatory variables.
accuracy using specialized software, assuming that the exten-
sive set of required data is available. If not, a virtual system is In this example, it turned out that four clusters were sufficient
used (see Fig. 1). This entails the calculation of the losses that to divide the space of 22 regions into coherent groups (or zones).
an efficient model system (i.e., the virtual system) would This is illustrated in Fig. 4. The primary distribution voltages in
incur when providing electricity service to the load of the spe- this system are 11 and 33 kV.
cific distribution system under consideration. 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-
C. Hybrid Approach
able (including the amount and distribution of the load along the
This approach assumes that sufficient data are available for length of the feeder as well as parameters such as the length and
certain portions (or regions) of the system and are not available size of the conductors and the impedance of the MV/LV distri-
for the rest. In order to obtain an accurate assessment of the bution transformers.) Using a bottom-up approach, we then pro-
existing technical losses in a system with such incomplete data, ceeded to calculate (via load-flow simulations) loss functions
losses may be computed for those regions where a complete set for the representative feeders. Loss functions parameterize tech-
of information is available. Then, technical losses for the rest nical (capacity) losses as a function of the load they carry, both
of the regions can be estimated by means of clustering tech- of which are expressed as a percentage of installed capacity.
niques. This is a combination of the top-down and bottom-up Loss functions for selected representative feeders in this ap-
approaches described above. The advantage of the hybrid plication example are shown in Fig. 5 [12]. Observe that the loss
approach is that it is relatively less time consuming than the functions exhibit the expected quadratic shape. These loss func-
bottom-up approach and more accurate than the top-down tions were then used to estimate the technical losses of all the
approach. The disadvantage is that it requires more detailed other feeders in the same zone for which data were not available.
information than top-down methods while yielding results that It is clear that the accuracy of the estimation is a function of sev-
may not be as accurate as those of a bottom-up approach. eral parameters, including feeder utilization factor (i.e., the ratio

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



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
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.
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

Fig. 6. Distribution loss ratios in selected distribution companies around the world.

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.

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
Fig. 7. Loss ratios have decreased after privatization. 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
through our direct involvement with these distribution compa-
needed data for accurately estimating the total lossesand
nies (in most of the cases, the particular company wished to re-
particularly their breakdown into technical and nontechnical
main anonymous).
componentsare generally lacking.
Fig. 6 shows that in developing countries (see Developing We have presented a top-down/bottom-up approach for ac-
Countries in the figure), loss ratios exhibit a large degree of curately estimating technical system losses in electricity distri-
volatility, as their values can be anywhere between 5% and 38%, bution systems. The main feature of the approach is that it can
with the lower end of the range corresponding to companies that handle varying degrees of data availability.
have benefited from the incorporation of private sector opera- We have also presented the results of the application of the
tors. Fig. 6 also shows that in contrast, loss ratios in developed approach to the estimation of technical and nontechnical system
countries (see BenchmarkUSA in the figure) are expected losses in a developing country, where a complete set of required
to be in a relatively narrow range (i.e., 6%8%). This can be seen data was not available.
in the figure for the first two cases, presented in bars divided in
two colors (the division of the bar represents the average value).
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