The problem of transmission loss minimization in electric power grids through capacitor bank (CB) installation at some influential busbars has been tackled. Capacitor installation at some busbars reduces reactive power flow through grid lines, consequently reduces the reactive component of the current flows and the real power losses due to this component. Two factors are utilized for this purpose, the power loss sensitivity factor (PLSF) and the voltage sensitivity index (VSI). The first gives graded indication to the effect of reactive power flows on the total system losses whilst the second factor gives indication to the changes in voltage magnitudes due to CB installation. These two factors are then combined in one integrated factor used to arrange the system buses according to their effects on loss reduction. The benefit is shrinking the search space of the problem. The effectiveness of the proposed method is realized on a 35-bus sample system.