With increased load demands from the customers, substation congestion problems have become inevitable to the utility companies. Instead of expanding related system installations to alleviate the short-term overloads on the facilities, feasibilities of integrating distributed generator (DG) units to defer the possible congestions are of much concern. This thesis presents an optimal location and reliability analyzing scheme for distribution system integrated with DG units, and provides the systematic guidance to utility companies for related operations. The methodology focuses on the substation capacity constraints and provides the optimal DG locations that can alleviate the congestion problem with highest reliability indices. The proposed analyzing scheme can supply valuable assistance to the utility companies and small independent power producers (IPP) for determining the installations and integrations of DG units to defer possible emerging substation expansions.