An on-line method for the development of power system load models using system identification techniques is presented. The modelling procedure involves the selection of the load model structure as well as the estimation of the load model parameters. A load model structure selection technique based on the model reference error cost function is used and a square root based least squares estimator is developed. The collection of large volumes of data, for later off-line analysis, is avoided by using an online microcomputer system for the acquisition and analysis of perturbed load data. Load tests were carried out for both agricultural and industrial/commercial loads and typical results obtained are also presented in this paper.