An objective of protection system design is to support the system to serve its customers with highly reliable and low-cost power supply. In this paper, a radial distribution protection system design is formulated as a binary integer programming problem to identify number, types, and locations of the protective devices in order to optimize system total cost. The formulated problem takes into account not only the reliability of system components' but also the cost of utility investment and customer interruption, which comprises permanent and momentary interruption. The proposed method has been tested with an actual system with satisfactory results, from which it clearly shows the necessity of the inclusion of the customer interruption cost into the design problem. Copyright © 2009 Institute of Electrical Engineers of Japan. Published by John Wiley & Sons, Inc.