To improve the security & reliability of a distribution system, as muc
h power as feasible must go through a given transmission line. This ca
n be achieved by using shunt capacitors as compensators. These shunt c
apacitive compensators improve the load carrying capability of the lin
e by controlling the reactive power flow. Consequently, the capacitor
existence can not be ignored in evaluating system reliability. The pap
er applies the state-space method to calculate the reliability indices
for compensated & uncompensated systems with different success criter
ia. The importance of using shunt capacitors to improve the level of d
istribution system reliability is illustrated in addition to their ori
ginal function as reactive power controllers. Our procedure, based on
a Markov process, is applied to a numerical example, and indicates tha
t system reliability is improved when using shunt capacitors.