From the first customer located right at the substation to the last customer at the end of the line, voltage must be held within close limits, so the voltage regulation is more important than the thermal limit. On a typical distribution system during the peak load period, the voltage drop may be serious enough to cause unsatisfactory operation of home appliances in the residential area, and present many problems to manufacturing industries, where the voltage must be maintained within close limits to insure smooth operation. Among all the factors contributing to voltage drop in the distribution system, the voltage drop in the distribution transformer may account for 30% of this figure. If we can eliminate this factor, the power companies can provide better quality electricity to more customers with the existing distribution facilities, thus saving on initial investment costs. Taking all these problems into consideration, the author undertook the design of a capacitive transformer which would give zero voltage drop at rated load and at 80% lagging power factor while incorporating overload features to withstand 400% overload for at least 100 seconds. The following are the results obtained through design, manufacture and test of an initial experimental transformer built with these specific purposes.