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This paper discusses development of a computer algorithm which can select one overall reactive power installation pattern that will satisfy system performance constraints for both base case and contingency conditions. The cost of installation and base case losses are minimized. In addition, existing controllers are fully utilized prior to any addition of new installation. The computing algorithm employs a reduced gradient method of optimization in conjunction with simplex and integer routines to solve the reactive power allocation problem. The resulting program has been tested on a sample Consolidated Edison system.