Non-linear loads have become a larger percentage of the total load in commercial facilities. The use of non-linear loads results in excessive injection of harmonic components from the customer facility onto the utility power system. Conventional distribution transformers are of delta-star type, providing 3-phase 4-wire ac distribution. In such a case, the triplen harmonic currents caused due to non-linear loads get circulated in the primary delta winding. But this leads to increased power losses, temperature rise and subsequent de-rating as well as reduction in life of transformers. This paper proposes a novel method for recovering the drainage power which is normally wasted in the delta winding of the distribution transformer. The experimental studies conducted on a three kVA transformer shows that when the drainage power of delta winding is recovered it helps in improving the transformer efficiency and system power factor.