Abstract: Power Demand Side Management (DSM) has now become the main means of energy conservation and load regulation, whose main income is from the power investment costs which is called avoidable costs. The processes of evaluating the benefits of DSM projects are also the processes of evaluating the avoidable costs of power system. This paper establishes a comprehensive unit avoidable cost model of power system in which the transmission and distribution unit avoidable cost takes the allocation factor into consideration to reflect the different value of the load reduced in different time. This paper also establishes the avoidable costs model of the power generation company, the power company and community, and uses the case to analysis the profit of the power generation company, the power company and community in different DSM investment projects.