C APACITOR banks are widely used to improve power factor and voltage profile, reduce line losses and increase line capacity in distribution systems. However, overvoltage transients resulting from capacitor switching can cause adverse impacts on sensitive electronic loads. With large number of capacitor banks on distribution systems, capacitor switching transients are the most common transient events on the distribution systems, second only to voltage sag disturbances. On the other hand, capacitors in harmonic-polluted networks can cause problems such as: increasing voltage distortion, resonance, overheating and explosion of capacitor banks. The objective of this thesis is investigate the mutual power quality effects of capacitor banks and distribution systems, and to present the guideline for reducing these effects, with special emphasis on the estimation of switched capacitor bank location in the distribution systems using transient waveform analysis. The theoretical basis is discussed; the analysis and modeling results are obtained through the IEEE standard 13-bus distribution system simulation. Effects of the capacitors on power factor, resonance, distortions, and harmonic-pollution metering methods are investigated. The resonant frequency of the distribution systems is estimated through FFT based methods and existing capacitor switching transient waveforms. Transient energy, phase and RMS value changes of feeder currents and instantaneous changing of feeder voltages and currents are used in order to determine the switched capacitor bank location in distribution systems. In this thesis, two new indices are proposed for determination of switched capacitor bank location. One of the indices is based on bus voltage and feeder current instantaneous changing and the other one is based on feeder current instantaneous changing. The exact distance of switched capacitor bank from monitoring location is estimated. The switching instant and the values of voltage and current at the switching instant are Key Words Capacitor switching, power distributions, power quality, transient analysis, wavelet transform