In the opening electricity market, distributed generation can be used as reserve capacity, which can help to improve the reliability of distributed network. A reliability price and compensation model for distribution network with distributed generation is proposed in this paper, where the interests of both the power supplier and the customer is fully considered, and the investment cost is apportioned according to the customer's reliability requirements to obtain the reliability price. In addition, this method considers the outage cost of unit electricity as a variable that varies with the duration of power outages, which breaks the traditional idea that the outage cost of unit electricity regarded as a fixed value. Furthermore, the value engineering theory is used to derive the formula of reliability compensation, and the reliability compensation mechanism for distribution network with distributed generation is constructed. Finally, an example on RBTS-BUS6 system is presented to show the validity and practicability of the proposed method.