This paper reports the research findings of an innovative genetic algorithm approach for optimizing shunt capacitor sizes and their placement in radical distribution systems with the consideration of harmonic distortion limit due to the presence of nonlinear power electronic devices. The algorithm is based on a genetic algorithm solution technique to minimize cost under the additional constraints of maximum limit in harmonic distortion factor. A harmonic distortion calculation is embedded in the genetic algorithm solution routine to enhance the optimal capacitor allocation solution. Results of simulation show that the approach is effective for such a discrete value optimization problem.