A method of calculating the yearly owning and operating cost of a distribution transformer is developed taking into consideration the loss of life due to overload. Using the developed methods, the potential benefits of managing an overloaded distribution transformer was calculated for a transformer on the Virginia Electric and Power Company (Vepco) System.

By loading the transformer according to a saturation type load growth curve considered typical for Vepco System, its life was approximated. The fixed carrying charges were then applied at a rate sufficient to recover all invested capital during the life of the transformer.

The potential savings were calculated when cutting the secondary and adding a transformer of equal one size smaller and two sizes smaller than the original. The study indicated no savings would be obtained when cutting the secondary.

The only savings indicated were obtained by taking down an overloaded transformer and replacing it with the next larger size.

The potential savings of managing these transformers presently installed, as well as those to be installed in the next years, as well as those to be installed in the next ten years, was calculated using a critical rate of return of 6, 7, 8, 9, and 10 percent. The calculated savings were $3,251,500 at 6 Percent, $2,674,400 at 7 Percent, $2,075,400 at 8 Percent, $1,602,200 at 9 Percent, $1,257,300 at 10 Percent.