The reliability of energy systems is a key aspect in the design and operation of modern energy system management. The interruptions highly affected both the society and the utility. Mostly the major challenge in city of Woreta has been power distribution reliability. It leads high cost on customers and decrease product quality. In the city of woreta customers have had to cope with frequent interruptions and the usefulness has taken a long time in relief. Hence, it has to get good solution. Thus, the objective of the study is to assess the reliability of the study is to evaluate the reliability of the current distribution system and propose solutions to improve reliability in the smart grid environment. Woreta substation of Woreta district, which has high rate of interruption , is selected as case study area. Woreta substation’s reliability is assessed based on data of three years from Ethiopian electric power corporation. The single line diagram of the existing system investigated by ETAP software and simulates the common reliability indices of the substation SAIFI, SAIDI and EENS values were 202.9198 (in/crusty), 312.5043 (hrs/cust.yr) and 3047.148 (MWhr/yr) respectively. Generally, the reliability of the system has been improved by using automatic sectionalizing switch. The results show that the optimal installation of the automatic re-closers will ena ble xii the concept of a self-healing power distribution grid that can recover quickly and automatically from major disturbance events, and restore power to as many customers as possible, resulting in significant improvement in the system indices, for instance in SAIDI and SAIFI. This has resulted also in great savings to the power providers, since the utility will be able, using the automatic re-closers, to reduce the interruption duration which reduces the expected un served kWh to the consumers . The common reliability indices of SAIFI, SAIDI and EENS values is 202.9198 (fr/cust.yr), 312.5043 (hr/cust.yr.), and 3047.148 (MWhr/yr) decreased to 49.238(fr/cust.yr), 80.77 (hr/cust.yr.) and 196.501 (MWhr/yr) respectively. The percentage of improvement of SAIFI, SAIDI and EENS would be also 75.7%, 74.15% and 93.6% respectively. Key Words: Distribution Reliability, Smart Grid, Network Reconfiguration, Re closer, ETAP