Distributed Generation (DG) is an emerging approach for providing electric power in heart of the power system. It mainly depends upon the installation and operation of small size, compact and clean electric power generating units at or near an electric load (customer). It has become necessary to investigate the technical and economic impact future connections of Distributed Generation on electric power distribution networks, and evaluate some of these effects of power sector deregulation.

In a power system network, proper planning and DG placement can minimize the system electrical losses, whilst improper placement could lead to increased system losses. This is utmost important since losses in any power network are proportional to the square of the current and offsetting load with DG reduces losses. B-coefficients method (Kron's loss formula or Loss coefficients method) is used to calculate the total system loss. B-coefficients are functions of the system operating state. If a new scheduling of generation is not drastically different from the initial operating condition, the loss coefficients may be assumed constant.

The factors influencing the power generation at minimum cost are operating efficiencies of generators, fuel cost, and line losses. Therefore the electrical losses will affect generation costs. Power networks with higher losses have higher fuel costs. Economic dispatch is a method of finding the real power scheduling of each plant in such a way as to minimize the total generation costs. Economic dispatch method is implemented to minimize the total generation cost.

In this paper a suitable location of the DG to improve network performance at reduced or controlled network losses, improved voltage profile and the generation cost are determined. The power system networks of 5-bus system and 26-bus systems are analyzed using MATLAB software.