The calculation of avoidable costs is the core technology of power demand side management project evaluation and the main basis for measuring demand side management projects.The processes of evaluating the benefits of DSM projects are also the processes of evaluating the avoidable costs of power system. A comprehensive unit avoidable cost model of power system is established 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. The avoidable costs model of the power generation company, the power company and the community is also established, and a case is used to analyze the profit of the power generation company, the power company and community in different DSM investment projects.