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Markov chains are used in the reliability modeling of substation diagrams. In the adopted approach three states are assigned to the equipment operating conditions, corresponding to the normal, overload and repair states. Models are built including emergencies up to the second order. The overload influence on component failure rate and on substation reliability indices is examined. The components studied with more detail are the power transformer and the cables insulated with extruded material. The solution is achieved by the minimal tie-and-cut-set method and equations are developed for contingencies up to second order. Finally, an example is presented of a distribution substation and two load cycles.