Reliability engineering with regard to distribution systems involves gathering outage data andrnevaluating system designs. The great majority of service interruptions that affect customers arerncaused by problems on the distribution system. rnFor the analysis, data has been collected from Addis Alem electric distribution system. Therncollected data are a recorded data that includes types of faults, frequency and duration ofrninterruption of 15kV outgoing feeders’ of the distribution system. rnCurrently customer served from Addis Alem substation are affected by frequent power interruptionsrnand power quality problems. The interruptions are caused mostly by earth fault and short circuit.rnThere also planned outage for operation purposes. The substation’s System Average InterruptionrnFrequency Index (SAIFI) is 178.37 Interruption per customer per year, System Average InterruptionrnDuration Index (SAIDI) is 152.22 Hour per customer per year. The substation is not reliable by thernstandard of Ethiopian Electric Agency (EEA) which set (SAIDI = 25 and SAIFI = 20). Thisrnreliability disparity requires finding the best solution for improving the reliability of distributionrnsystem. Therefore, the best solutions to distribution system reliability problems, integratingrnDistribution Generation (DG) to the existing network as backup, which is evaluated in this thesis. rnFor best placement of DG on the distribution system at different load point, reliability improvementrnwith DG has been investigated. The size of a single DG is 4MW and fed to the grid as backup whenrnthere is power interruption. Reliability analysis based on simulation studies carry out byrnDIgSILENT Power Factory Software. rnHoleta feeder was studied to investigate the effect of DG at the end line to reliability. From thernsimulation, SAIFI and SAIDI of this feeder without of DG are 291.99 interruption per customer perrnyear and 195.63 Hour per customer per year respectively. With DG option at the end of the line, thernsimulation result shows that the SAIFI and SAIDI of this feeder improved to 91.16% and 91.16%rnrespectively.