This paper presents a new optimization method for reactive-power planning of a subtransmission network under normal operating conditions. The planning problem is divided into a master problem and two subproblems. The master problem is to determine yearly investment in reactive-power compensation devices for expected load growth over a planning horizon. The subproblems are to determine the optimal operation of the power system under normal conditions. The master problem is reduced to a yearly Hamiltonian minimization problem, thereby reducing the dimensionality-of-optimization algorithm. Two subproblems, P-optimization and Q-optimization, both minimize the fuel requirement using a unified approach.