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An economic analysis method is proposed for distribution system planning considering the N-1 guidelines, in which the fundamental properties of power supply capability and the economic benefit are combined. The economic efficiency and the potential power supply benefit of a distribution system are thus evaluated. A complete system of economic evaluation indices is presented, including the static profitability indices and the dynamic investment benefit indices. Applications show that this method and index system can take into account both the basic characteristics of distribution system and the special features of power energy that differ from general merchandise. So they can not only evaluate the economic benefits for project investment combining with the traditional approaches of engineering economics, but can also assess the economic benefits of system-owned assets for power supplying effectively, as well as for the economy evaluation of the distribution system in operation or the planning schemes. This method can even be applied to assess the economic benefits of transmission system.