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Loads in a power distribution system network are mostly inductive and lead to poor power factor. In order to utilize the generated power optimally it is necessary to maintain close-to-unity power factor. Power factor correction is possible by introducing the capacitive loads in the circuit, as to nullify the effect of inductive loading. Due to simplicity of analysis of radial distribution systems, most previous work  studied the effect of nonlinear and capacitive loads on the optimal solution of the Capacitor Placement Problem (CPP) for radial distribution systems only. In this paper, we study optimal capacitor placement on interconnected distribution systems in the presence of nonlinear loads. The placement problem is solved using Genetic Algorithms (GA) as implemented in the ETAP Power station software. Results (power losses, operating voltages and annual benefits) are analyzed. Computational results show that harmonic components affect optimal capacitor placement in all system configurations. If all loads were linear, interconnected and loop system configurations offer lower power losses and better operating conditions than the radial system configuration.