A systematic procedure is developed to locate and minimize the number of reactive power devices in power systems based on a set of indices and the sensitivity matrix. A new definition of the bus voltage performance index (VPI) is proposed for optimal reactive power planning. It is equal to the root mean square value of the corresponding column of the sensitivity matrix. The VPI’s in previous work depend on the norms which can’ be defined in nonunique ways. In the proposed technique, the three indices are given different weights depending on their values. The load buses are also ordered on the basis of their values depending on the total weights at each bus for the three indices. This ordering of load buses as well as the sensitivity matrix are then used to determine the optimal location and number of reactive power devices required in the system.