Local generating facilities in power distribution networks can be used to supply the load, when the bulk supply points become unavailable, to a load point during outage conditions. The purpose of the paper is to describe and demonstrate the modelling and evaluation techniques that are necessary to translate the conceptual ideas of local generation to practical analysis. These techniques construct the relevant statespace diagrams and identify the system down states. The steady-state probabilities of a general state-space diagram are evaluated by applying a set of equations and a computational algorithm to minimise the computer storage and time requirements and eliminate the rounding errors incurred when a conventional Markov approach is used. The algorithm developed is suitable for either computer implementation to analyse complex systems or hand calculations to analyse simple systems. A typical distribution system is analysed which illustrates the additional results and information that can be achieved from the use of these extended system models.