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The topology of the electrical distribution systems is somehow similar to the topology of leaves as a natural optimal system. The leaves having internal loops (ILs) are more reliable than ones having radial structure. In this paper, a novel approach using ILs is proposed to optimize the distribution systems reliability. As using ILs in electrical distribution system improves the system reliability and requires additional costs, a cost-benefit analysis is necessary. Using a novel way such as ILs to improve the power grid reliability in compare to conventional approaches is one contribution of this paper. Considering the economic effects in addition to technical aspects is another advantage of the proposed method. In this paper, the cost of energy not-supplied (CENS) reduction is used to investigate the benefits of ILs that simplifies and reduces the computations regarding the system CENS without ILs and through using them. The introduced objective function (OF) consists of the saved cost due to reduction of CENS and also the additional investment of using ILs. The method is applied to a realistic 34-bus system of Tehran Regional Electrical Company (TREC). The genetic algorithm (GA) is used to solve the optimization problem. The test results illustrate by reasonable investment for ILs according to an optimum solution, the considerable reliability improvement and economic benefits are achievable. All Rights Reserved Nomenclature Loop info Matrix of internal loops informationInfo Matrix of network information T Repair time (h) mb Number of main branches mj Failure rate of j-th section located in the main branch (failures/year) L mk Installed amount of load to the k-th section of the main branch (kW) IL Internal loop LFIL Line forms internal loop ts(i) Number of sections located in the i-th lateral branch Info(i,1) Installed load to i-th section (kVA) Info(i,2) Failure rate of i-th section (faults/year) Info(i,3) Binary variable based on existence or non-existence of the protective device in i-th section Info(i,4) Binary variable based on existence or non-existence of the switching device at i-th section Info(i,5) Sending bus of i-th section Loopinfo(i,1) Sending bus of the line forming i-th loop Loopinfo(i,2) Receiving bus of the line forming i-th loop Loopinfo(i,3) Cost of construction of the line forming i-th loop (1000 US$) fdlb(l) First downstream lateral branch of l-th section locatedin the main branch ENSDCR 1 Energy not-supplied decrement by using internal loops when a fault occurs in main branches (kWh) ENSDCR 2 Energy not-supplied decrement by using internal loops when a fault occurs in lateral branches (kWh) ENSDCR Total energy not-supplied decrement by using internal loops (kWh) CENSDR Cost of energy not-supplied cost decrement by using ILs (US$) AENSDCR Annual energy not-supplied decrement by using internal loops (kWh/year) ACENSDR Annual cost of energy not-supplied decrement by using internal loops (US.$/year) i Binary variables based on the existence or non-existence of i-th internal loop Matrix of cont...