To improve the power supply reliability of distribution system is an important goal of smart grid construction. Due to various influencing factors, it is of great risk for the power supply enterprise to invest in improving the distribution network power supply reliability. By elaborating the basic principles and structure characteristics of the power distribution automatic system, a new cost-benefit analysis model for reliability of distribution network automation is presented. Combined with the engineering calculation method for distribution system reliability, the quantitative calculation of the costs and benefits of improving distribution system reliability is conducted, the economic evaluation of the modification scheme for distribution automation system is made based on normal cloud theory, and multiple comprehensive evaluation indexes are defined, which provides intelligent decision support for power management layer. An actual distribution system example analysis shows that the model has better practicability and operation.