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A new approach for optimal allocation of sectionalizing switches and loop switches in distribution networks is presented. The range of the number of switches to be installed is roughly estimated. For each switch number, an improved genetic algorithm based on compressed coding is applied to obtain the optimal allocation of switches, in which, the reliability of distribution system is used as the index. Consequently a set of quasi-optimal switch allocations is established. The scheme meeting the required reliability and with the least number of switches is determined to be the optimal plan with the most investment benefit. An IEEE RBTS-2 bus system is used as an example for optimal switching device placement planning. The results show that the proposed approach is feasible.