Assessing distribution utilities' operation performance is an important precondition for effective supervision and competition promotion. A hierarchical yardstick competition approach to assessing the operation performance of distribution utilities is proposed. Firstly， a hierarchical analysis of indices reflecting the operation situation of distribution utilities is incorporated in the overall objective， the criteria layer and the index layer， by employing the analytic hierarchy process（AHP）. Secondly， the judgment matrix and data envelopment analysis（DEA） are used to gain the weights and performance index of assessment criteria in the criteria layer and index layer， respectively. Finally， the overall relative performance index is derived by using the analytic hierarchy process. A numerical example is given to prove its feasibility and validity. This project is expected to provide scientific and practical reference to supervisors as well as managers of electric power companies for decision-making.