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In distribution systems, network reconfiguration and capacitor control, generally, are used to reduce real power losses and to improve voltage profiles. Since both capacitor control and network reconfiguration belong to the complicated combinatorial optimization problems, it is hard to combine them efficiently for better optimization results. In this paper, a joint optimization algorithm of combining network reconfiguration and capacitor control is proposed for loss reduction in distribution systems. To achieve high performance and high efficiency of the proposed algorithm, an improved adaptive genetic algorithm (IAGA) is developed to optimize capacitor switching, and a simplified branch exchange algorithm is developed to find the optimal network structure for each genetic instance at each iteration of capacitor optimization algorithm. The solution algorithm has been implemented into a software package and tested on a 119-bus distribution system with very promising results.